Cut in Universal Cedit taper

The chancellor announced in his October 2021 Budget a cut in the Universal Credit rate from 63% to 55%. This reduces next year the effective marginal tax rate workers receiving universal credit pay on their earnings from 75% to 70%.

The reduction in the taper rate is 8%, but, because it applies to net income after income tax and NICs, the reduction in the overall marginal rate is only about 5%. 

The 70% rate is the result of adding together income tax at 20%, national insurance contributions at the new 13.25% and the reduction in universal credit 36.7%.

OECD publishes figures for income tax, social security contributions less cash benefits for all member states. The OECD average for a family with two children on 67% of the average wage (in the UK £28.000) was 37.9% in 2020 (latest available). The UK figure was 75%.