Higher rate of income tax axed for top earners and 1p cut for all amid biggest tax cuts since 1972
23 September 2022, 10:52
The top rate of income tax has been scrapped with the bottom rate having been cut by 1p as part of the government's emergency budget.
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Chancellor Kwasi Kwarteng announced that the 45% higher rate of income tax will be "abolished" and replaced with a single higher rate of 40%.
He said the "simpler system" will "reward enterprise and work".
It means those earning more than £150,000 will be able to keep more of their earnings, with their tax going down to 40% for anything above £50,000.
Meanwhile, workers earning between £12,571 and £50,270 a year will be paying the basic rate of income tax, which has been cut by 1p a year earlier than first intended.
Speaking in the Commons, Mr Kwarteng said the UK's additional rate of income tax at 45% is higher than the headline top rate in other G7 countries.
He told MPs: "I'm not going to cut the additional rate of tax today. I'm going to abolish it altogether.
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"From April 2023 we will have a single higher rate of income tax of 40%. This will simplify the tax system and make Britain more competitive.
"It will reward enterprise and work. It will incentivise growth. It will benefit the whole economy and the whole country.
"And, Mr Speaker, after all, this only returns us to the same top rate we had for 20 years - including the entire time the Opposition was last in power - bar one month."
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Mr Kwarteng added: "I can announce today that we will cut the basic rate of income tax to 19p in April 2023 - one year early.
"That means a tax cut for over 31 million people in just a few months' time. This means we will have one of the most competitive and pro-growth income tax systems in the world."
The Government's mini-budget is estimated to contain total tax cuts of £45 billion by 2026/27, according to Treasury figures.
Government estimates also indicate that tax cuts in 2023/24 will be worth nearly £27 billion.
It is understood that it is the biggest tax cut in 50 years.
