Revealed: National insurance cut predominantly benefits the richest

• For every £1 the Chancellor spends on national insurance cuts, almost 50p goes to the richest households
• National insurance cuts give more to London and the South East
• Average worker benefits by just £5.86 a week

IPPR analysis of the Budget tax measures has revealed that the chancellor’s two pence cuts to employee and self-employed national insurance contributions primarily benefit households with the highest incomes and are skewed towards London and the South East.

Using the latest OBR data to analyse the cut, which the government estimates will cost £10.1bn in 2024/25, IPPR finds that:

• For every £1 the Chancellor spent cutting NICs 45p went to the 20 per cent of households with the highest income
• Just 3p went to the fifth of households on the lowest incomes

Where the money goes: distribution of reduced tax across household income quintiles

Source: IPPR Tax and Benefit Model

The geographical distribution of benefits of the changes to National Insurance also skew towards London and the South East.

Geographical distribution of average household tax savings

Source: IPPR Tax and Benefit Model

Coming on the back of the cost-of-living crisis, the amounts by which households actually benefit are relatively small:

• An employee on a median income of £28,000 benefits by just £5.86 per week
• Whereas someone earning £65,000, putting them in the top 10 per cent of earners, will benefit by £14.50 per week

Tax savings for employees across the income spectrum due to 2p reduction in NICs

Source: IPPR analysis using HMRC (2024)

David Hawkey, senior research fellow at IPPR, said:

“Cutting national insurance, instead of using the revenue to improve our crumbling public services is a poor political choice. It’s not what the public wanted, it’s not going to revitalise our economy and it’s not fiscally responsible.

“Those who benefit most from the tax cut are predominately the already wealthy living in the South East of England, while all of us will be the ones who suffer from the cuts to public services.”

ENDS

Dr George Dibb, associate director for economic policy at IPPR, and David Hawkey are available for interview

CONTACT

David Wastell, Director of News and Communications: 07921 403651 d.wastell@ippr.org

Liam Evans, Senior Digital and Media Officer: 07419 365334 l.evans@ippr.org

NOTES TO EDITORS

• IPPR (the Institute for Public Policy Research) is an independent charity working towards a fairer, greener, and more prosperous society. We are researchers, communicators, and policy experts creating tangible progressive change, and turning bold ideas into common sense realities. Working across the UK, IPPR, IPPR North, and IPPR Scotland are deeply connected to the people of our nations and regions, and the issues our communities face. We have helped shape national conversations and progressive policy change for more than 30 years. From making the early case for the minimum wage and tackling regional inequality, to proposing a windfall tax on energy companies, IPPR’s research and policy work has put forward practical solutions for the crises facing society. www.ippr.org