45p tax rate

Higher earners will lose thousands of pounds in tax savings after the Chancellor abandoned plans to abolish the top rate of income tax next year.

The policy was originally announced less than two weeks ago in the mini-Budget, alongside proposals to introduce a 1p cut to the basic rate of income tax in April. [Kwasi Kwarteng confirmed the Government would not abolish the 45p rate of income tax](https://www.telegraph.co.uk/politics/2022/10/03/liz-truss-news-kwarteng-45p-tax-conservative-conference-updates/) for anyone earning over £150,000 in a statement this morning. Higher earners will lose thousands of pounds in tax savings after the Chancellor abandoned plans to abolish the top rate of income tax next year.

Scrapping the 45p income tax band for the country's highest earners was announced in the Chancellor's mini-Budget in a bid to grow the economy. The plan ...

[concern that the rate of benefits will not increase in line with inflation](https://inews.co.uk/news/politics/benefits-real-terms-cut-liz-truss-kwasi-kwarteng-claw-back-costs-1885824?ico=in-line_link). [mini-Budget](https://inews.co.uk/news/who-will-benefit-what-the-mini-budget-means-for-you-1876787?ico=in-line_link) in a bid to grow the economy. Sterling surged to $1.13 at one point overnight, going down to $1.12 in early Monday morning trading. [average yearly tax cut of £10,000](https://inews.co.uk/news/politics/budget/will-tax-cuts-affect-me-how-much-tax-pay-1878841?ico=in-line_link). [ sparked the pound’s return to levels seen before the mini-Budget](https://inews.co.uk/news/politics/pound-dollar-u-turn-scrapping-45-income-tax-rate-kwasi-kwarteng-1890293?ico=in-line_link). [Liz Truss](https://inews.co.uk/news/politics/liz-truss-faces-growing-tory-rebellion-as-mps-threaten-to-vote-down-cut-in-top-rate-of-tax-1890055?ico=in-line_link) and [Kwasi Kwarteng have reversed plans](https://inews.co.uk/news/politics/liz-truss-ditch-plans-45p-tax-rate-uturn-tory-backlash-1890264?ico=in-line_link) to abolish the top rate of income tax.

Sterling recovers to levels seen before mini-Budget sent it tumbling to record low against dollar.

Sterling and gilts rally after reversal of showpiece UK government policy.

Downing Street said the Prime Minister backs her Chancellor despite the mid-conference humiliation.

Mr Gove told Times Radio that he would “need a lot of persuading” to support a Government that abandoned the commitment to uprate benefits in line with inflation. Mr Shapps then used a Times column to say “this is not the time to be making big giveaways to those who need them least” because “when pain is around, pain must be shared”. And he had been set to insist in a speech now likely to be overhauled that his measures are vital to boost growth and avoid a “slow, managed decline”. Asked if he would now vote for the rest of the package, Mr Gove told Times Radio: “Well yeah I think so on the basis of everything that I know.” Hours before he had been due to tell the Conservative Party conference they must “stay the course” on the plans, he issued a statement saying: “We are not proceeding with the abolition of the 45p tax rate.” Paul Johnson, the director of the Institute for Fiscal Studies think tank, said the reversal of the policy that would have cost £2 billion a year was only a “rounding error in the context of public finances”.

The humiliating climbdown, announced this morning by Kwasi Kwarteng, will reduce the unfunded tax cuts in the chancellor's mini-Budget by just £2bn, from £45bn ...

“So from that point of view, it is pretty much as we were.” [Terms of use,](https://www.independent.co.uk/service/user-policies-a6184151.html) [Cookie policy](https://www.independent.co.uk/service/cookie-policy-a6184186.html) and [Privacy notice.](https://www.independent.co.uk/service/privacy-policy-a6184181.html) “To the extent that what we saw a couple of weeks ago was leading to fiscal unsustainability, it still is. [Privacy policy](https://policies.google.com/privacy?hl=en) and [Terms of service](https://policies.google.com/terms?hl=en) apply. “Nothing really has changed. The head of the Resolution Foundation low-pay thinktank, Torsten Bell, agreed: “U-turning on 45p doesn’t change the big picture of a £40bn package of unfunded tax cuts which drove the market reaction (and doesn’t) avoid the big spending cuts that will follow. If he was unwilling to do any of these things, Kwarteng would have to “brazen it out” and declare that the OBR had found he would not meet his fiscal target to have debt falling as a share of GDP within three years, but believed he could do it in five or seven. Mr Johnson said that the U-turn could provide the government with “a bit of breathing space” with the markets. Mr Johnson said that the “big story” from the mini-Budget remained that it delivered an unfunded package of tax cuts totalling more than £40bn without the backing of an independent assessment by the Office for Budget Responsibility spending watchdog. What has changed, perhaps, is a sense that this is a government that will back down, that will listen and will take opinion seriously.” And he said it sets the scene for “dramatic” cuts to public spending in Mr Kwarteng’s 23 November fiscal statement, unless the chancellor is prepared to back down on further Budget measures, raise taxes elsewhere or face down the markets over his failure to rein in debt. In terms of its judgement on inflation and the knock-on decisions on raising interest rates “the Bank will be just as concerned that £43bn is being pumped into the economy as it would have been with £45bn”, he said.

Truss has left herself open to rebellion after rebellion from the numerous awkward former Cabinet ministers and backbench MPs who have learned she will bend ...

“Widespread dismay at the fact that three years of work has effectively been put on hold. Despite her majority in the Commons, the PM faced an embarrassing rebellion on a financial strategy she does not have a mandate for. Only time will tell if Ms Truss is destined to follow in the footsteps of former PM Theresa May who suffered repeated defeats in the House of Commons as she tried to get complicated Brexit legislation through.

Kwasi Kwarteng and Liz Truss will be hoping move reverses some of effects of mini-budget.

The mini-budget hasn't broken the economy, but it might just have broken the Conservative Party. On Sunday, Party Chairman Jake Berry was in bullish mood, ...