Minimum wage rise: Nearly half lost to tax hike new analysis reveals

Research by the Liberal Democrats has revealed that a full-time worker paid the National Living Wage will see nearly half (44%) of the proposed increase wiped out before it even reaches their bank account due to tax and the increase in National Insurance.

Currently, an employee working 40 hours a week and paid today’s National Living Wage of £8.91 an hour, takes home £16,264.50 – after income tax and the current rate of National Insurance (12%).

Once the Government raises the National Living Wage to £9.50, and National Insurance to 13.25%, that worker will see their take home pay rise by £707 a year. However, if the Government hadn’t raised National Insurance, they would have seen their after-tax income increase by £835 instead.

This means that they would have been able to keep over two thirds (68%) of their pay rise, whereas now they will only take home just over half (58%).

Once combined with the cut to Universal Credit, the same worker could be left poorer by £780 a year.

Liberal Democrat Treasury Spokesperson Christine Jardine MP said: “Ahead of the budget people will be looking to the Chancellor’s announcement of a pay rise to help them, instead they will be bitterly disappointed to see almost half of any rise snatched away by the Treasury before it even reaches their bank accounts.

Christine Jardine MP

“The Conservatives carelessly breaking their promise not to increase National Insurance is hitting working people hard on their paychecks, snatching back money from people who have worked hard for their salary.

“The Chancellor seems to be taking working families for granted. Instead of a fair deal, families across the country are facing a budget nightmare with a soaring rise to the cost of living paired with tax hikes left right and centre.”

Published and promoted by Oldham Liberal Democrats, Booth House, Featherstall Road South, Oldham OL9 7TU. If you enter your details on this website, the Liberal Democrats, locally and nationally, may use information in it, including your political views, to further our objectives, share it with our elected representatives and/or contact you in future using any of the means provided. Some contacts may be automated. You may opt out of some or all contacts or exercise your other legal rights by contacting us. Further details are in our Privacy Policy at