U-turn on abolishing 45% income tax rate
Following on from the Chancellor’s shock ‘mini-budget’ on 23 September, the Government has announced that it has abandoned its plan to abolish the 45% additional rate of income tax.
The 45% additional rate income tax band for those earning more than £150,000 was intended to be scrapped entirely. This was estimated to come at a cost to the Treasury of approximately £2bn a year.
(https://blog.charlesrussellspeechlys.com/post/102hxpt/chancellor-abolishes-45-rate-of-income-tax)
Described as a tax cut for the rich, the Chancellor said the decision to abolish the additional income tax rate “has become a distraction from our overriding mission to tackle the challenges facing our country”.
While many high earners had planned to make significant pension contributions this year to capitalise on their expected future tax cuts, these plans have now been thrown into disarray.
Given this U-turn and the continuing economic consequences and widespread condemnation of the ‘mini-budget’, we will wait to see whether any more of the £45bn package of tax cuts are reversed or any further developments arise before the budget is voted on by Parliament.
This U-turn by the Government emphasises that a long-term vision is essential when it comes to tax and estate planning.
Liz Truss’s government has abandoned its plan to abolish the 45% top rate of income tax in a humiliating U-turn, after a growing Conservative revolt over the policy and a turbulent reaction from markets.
