You might have seen the claim:
“UK workers today pay less tax on their wages than at most times since World War II.”
Technically, that’s true – but it’s also misleading if you think it means we’re paying less tax overall.
The Tax Wedge – What They’re Talking About
The “tax wedge” is the share of your gross wage taken by direct taxes on employment – mainly Income Tax and employee National Insurance – before you see your take-home pay.
After World War II and well into the 1970s:
- Top income tax rates were huge – up to 83% on earned income and 98% on investment income.
- Even middle earners paid much higher rates than today.
Back then, the wage tax wedge was much larger.
What’s Changed?
From the 1980s onwards:
- Successive governments (Labour and Conservative) cut headline income tax rates.
- But they increased indirect taxes like VAT, fuel duty, and council tax.
By 2024:
- The employee wage tax wedge hit its lowest level since the 1940s.
- In 2025, changes nudged it up slightly – but it’s still around mid-1990s levels.
The Catch – You Still Pay More Overall
Lower wage tax sounds like good news – but here’s the problem:
- While wage-specific taxes have fallen, the total tax burden is now at its highest since WWII – around 37% of the UK’s GDP, and forecast to hit nearly 38% by 2028.
- The difference is that much more tax is now collected after you’ve been paid – through VAT, duties, property taxes, and other indirect charges.
Bottom Line
Yes, you keep more of your wages before you spend them.
But once you buy fuel, pay your council tax, grab a pint, book a flight, or renew your car insurance – the taxman takes his cut.
The system has shifted:
- Then: Tax taken heavily from wages.
- Now: Tax spread across almost everything you spend or own.
Either way – the government’s share of the economy is bigger than at almost any time in the last 80 years.
Hope isn’t what they promise you. It’s how you carry on when they don’t deliver. — Dave Carrera
