Fiscal drag makes taxpayers worse off

Fiscal drag will leave low earners worse off after tax cuts

Analysis suggests that fiscal drag means those earning less than £26,000 will actually be worse off after cuts to National Insurance. Experts have refuted the Prime Minister's claim that his tax cuts will leave people £900 better off, with fact-checking organisation Full Fact clarifying that average workers - those on £35,000 per year - will actually save just £340 annually, while workers earning less than £26,000 will be worse off "when all tax changes are included." The difference is due to fiscal drag, with the thresholds at which workers pay tax, or are taxed at higher rates, having been frozen since 2022. The Institute for Fiscal Studies has said the latest NI cuts "just serve to give back a portion of the money that is being taken away through other income tax and NI changes."