Briefing: threshold freezes and rate cuts

In his autumn statement in November the chancellor cut the main rate of national insurance from 12 to 10 per cent, effective from 6 January.[1] In his budget, he cut it again by another 2 percentage points to 8 per cent,[2] while stating a ‘long term’ ambition to abolish it entirely.[3] This is welcome news for taxpayers but comes after years of personal allowance freezes during rapid inflation.

This note analyses the changes to the personal allowance over time and the impact of both tax policies on minimum wage earners, average earners and those who earn £50,000 a year.




Key findings

  • The personal allowance rose from 27 per cent of an average worker’s full-time earnings in 2009-10 to a peak of 43 per cent in 2019-20. This has been cut to 36 per cent in 2023-24, followed by 35, 34 and 33 per cent.
  • The 2024-25 rate of 35 per cent will be the lowest since 2012-13 when it was 33 per cent.
  • The personal allowance was 57 per cent of a full-time minimum wage earner’s income in 2010-11. This rose to 82 per cent in 2015-16. This has been cut to 62 per cent in 2023-24 and will be cut again to 56 per cent in 2024-25.
  • The higher rate threshold was 83 per cent above full-time average earnings in 2010-11. This fell to 59 per cent in 2016-17 before rising to 70 per cent in 2019-20. It has been cut to 43 per cent in 2023-24 and is forecast to fall to just 34 per cent in 2026-27.




[1] HM Treasury, Autumn Statement 2023, November 2023, p.2.

[2] HM Treasury, Spring Budget 2024, March 2024, p.2.

[3] Riley-Smith, B., Jeremy Hunt signals end of National Insurance, The Telegraph, 6 March 2024.

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