UK govt scraps plan to cut 45p tax rate for higher earners

The UK government has U-turned on its plan to scrap 45p rate of income tax for higher earners.

Kwasi Kwarteng, Chancellor of the Exchequer, told the BBC that the proposals had become “a massive distraction on what was a strong package.”

The decision was taken after several Tory MPs criticized the plan.

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Part of tax cuts

UK’s Prime Minister Liz Truss had on October 2 said that she was committed to the plan to scrap 45p rate paid by people earning more than £150,000 a year. The plan was announced as part of a package of tax cuts.

According to Kwarteng: “The plan was drowning out a strong package including support for energy bills and cuts to the basic rate of income tax and corporation tax.”

He said the prime minister had decided not to proceed with the abolition of the rate.

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The chancellor said he and talked to the prime minister. “I said this is what I was minded to do and we decided together, we were in agreement that we would not proceed with the abolition of the rate,” he said.

Pressed on whether his economic plans would mean spending cuts for public services, the chancellor said there would be more details in the government’s fiscal plan on November 23.

Truss had on October 2 said the move to cut the top rate of income tax was “a decision that the chancellor made”.

She, however, also said that she was absolutely committed to it as part of a package to make the tax system “simpler” and boost growth.