The Government announced today that it is abandoning its plan to abolish the 45p rate of income tax for those who earn £150,000 per annum or more. It had been due to come into force on 6th April 2023, subject to parliamentary approval, but now it will not be put to the house.
Chancellor Kwasi Kwarteng said “it is clear that the abolition of the 45p tax rate has become a distraction” and added “we get it and we have listened”. He further added that no further tax cuts would be announced before a medium term “fiscal plan” is delivered on 23rd November following an OBR review. The chancellor has previously confirmed there will be a budget in spring 2023.
The move comes after heavy criticism of the plan from Conservative MP’s, Opposition MP’s and across the news media; it directly contradicts Liz Truss’ assertion in a BBC interview on Sunday that she would not abandon the policy. The policy had been criticised as being unfair on the poorest earners during the cost of living crisis.
The change is also likely to have an impact on payroll software developers who were already having to make adjustments at short notice with the abolition of the 1.25 percentage point increase in national insurance on the 6th November 2022 and the subsequent scrapping of the planned social care levy.