The government will scrap the 45% top rate of income tax for high earners, replacing it with a 40% rate in a bid to simplify the tax system and make the UK more competitive, Chancellor Kwasi Kwarteng told the House of Commons today (23 September).
"The additional rate of income tax at 45% is currently higher than the headline top rate at G7 countries like the US and Italy, and it is even higher than social democracies like Norway," he told MPs.
"But I am not going to cut the additional rate of tax today, Mr Speaker, I am going to abolish it altogether. 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 and will reward enterprise and work. It will incentivise growth; it will benefit the whole economy and the whole country."
The additional rate of income tax applied to earners of £150,000 and over.
The government will also bring forward the one percentage point cut to the basic rate of income tax from 20p to 19p in April 2023, 12 months earlier than planned, the chancellor announced.
"That means a tax cut for over 31 million people in just a few months' time. This means that we will have one of the most competitive and progressive income tax systems in the world," he told MPs.
According to a report released alongside the speech, the one percentage point cut to the basic rate of income tax will save £5bn a year, with an average gain of £170 in 2023-24.
Kwarteng also told MPs that it would wind down the Office of Tax Simplification "to embed tax simplification into the heart of government... and mandated every one of my tax officials to focus on simplifying our tax rate".
