The bottom half of earners will lose any gains from next week’s lowering of national insurance payments when their income tax bills go up in April, a leading thinktank has warned. The Resolution Foundation said the combined effect of a cut in national insurance contributions (Nics) from 6 January and a freeze on income tax thresholds – pulling more people into paying higher rates as their wages rise – would only favour the top half of earners with incomes of £26,000 or more. Those earning about £50,000 a year would gain the most, the thinktank said in its new year’s message charting the winners and losers from government policies. Those findings will be a blow to the government, which has promoted the cut in the Nics rate paid by workers from 12% to 10% as an example of its long-term aim to reduce the taxes paid by UK households. Jeremy Hunt has said the government planned to reduce taxation when the economic situation improved. Recent reports have suggested the chancellor’s spring budget, which he confirmed this week would be held on 6 March, could contain cuts to inheritance tax and reductions in other levies – fuelling speculation of a possible May election. Rishi Sunak is understood to be ready to back an election that month as it will come after most households have benefited from the national insurance increase, but before the worst effects of the freeze on income tax thresholds have been felt. However, the real value of wages – after inflation was taken into account – would still be lower than at the time of the last general election in December 2019, the Resolution Foundation said, while real wages would be the same at the end of 2024 as they were in 2006. The thinktank put the nearly two decades of lost income growth down to wages stagnating in the years after the 2008 financial crash, and the surge in inflation over the past couple of years that has sent living costs soaring. “British households are on course to be poorer by 4%, or £1,200 on average, going into the coming election than they were coming out of the last one,” it said. “That is something never seen before in modern British history. Our new year’s resolution should be to make sure it never happens again.” Households on average have gained from the rise in interest rates since December 2021 to 5.25%, the report found, though there were large groups of winners and losers. The effect this year from higher savings rates pushed overall incomes higher by £19bn, but the gains mostly went to wealthier and older households, offsetting the higher financing costs for mortgage payers forced to remortgage their loans. “Rising interest rates actually boosted household income growth in 2023 by a net £19bn as the gains from higher savings income outweighed losses from higher debt costs,” the report said. “This is unprecedented (rising rates have historically made households poorer) – and won’t last into 2024 as another 1.5 million households will see their mortgage costs rise by £1,800 on average when they remortgage,” it added. The effect of rising mortgage and rent bills, combined with the end of cost of living payments, meant that “the richest half of households are set to see their incomes rise in 2024, while the poorest households will see income falls”, the report said. “This mixed picture will present challenges for politicians trying to paint in primary colours in a critical election year. But the living standards story for the parliament as a whole is far simpler: British households will, for the first time on record, be poorer at the end of a parliament than at its start.”