The government has announced that it is abandoning its controversial plan to abolish the top rate of Income Tax for the highest earners.
The proposal to scrap the 45% additional rate tax paid on income over £150,000 was a surprise announcement in the mini-budget on Friday 23 September.
It was one of a number of tax cuts aimed at helping to relieve the cost of living crisis and encourage growth in the economy. However, the fact that the proposal benefitted those least impacted by higher fuel bills, rising interest rates and soaring inflation has led to widespread criticism of the measure, even from within the Conservative Party itself.
In the face of growing opposition to the proposal, Chancellor Kwasi Kwarteng has been forced into an embarrassing U-turn just 10 days after the mini-budget.
The reversal means that high earners will continue to tax at 45% on their income in excess of £150,000 from 6 April 2023. This will reduce the benefit of any planning put in place to defer any income into next year.
The measure is expected to impact around 660,000 individuals or the highest 1.9% of earners.
The U-turn does not affect the removal of the Health and Social Care Levy and the reduction in the basic rate of Income Tax to 19%, both of which are still expected to go ahead from 6 April 2023.
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