45p tax rate explained: Q&A as Kwasi Kwarteng scraps plan to remove 45% rate of income tax on those earning above £150,000 from April next year

Chancellor Kwasi Kwarteng has announced he is scrapping plans to remove the 45% rate of income tax on those earning more than £150,000. 

The controversial plans, which had been revealed as part of his ‘mini-budget’ last week, had sparked outrage among opposition parties and even some Conservative MPs and spooked the markets.

Mortgage rates have risen to their highest level since before the pandemic as a result, the Bank of England was forced to inject more than £60billion into the economy and the pound crashed following last week’s announcement.

The Chancellor insisted the cut would, alongside other measures announced in the fiscal package, promote growth and encourage investment in the UK.

However, after days of mounting pressure from within his own party, Mr Kwarteng performed a U-turn and said the tax cut would no longer go ahead.

Here MailOnline answers your questions about the exactly why the policy provoked such a response.

Chancellor Kwasi Kwarteng announced last week that he planned to cut the 45p tax rate for people earning more than £150,000 a year

Chancellor Kwasi Kwarteng announced last week that he planned to cut the 45p tax rate for people earning more than £150,000 a year

The cut in income tax would have saved high earners thousands of pounds a year during the cost of living crisis

The cut in income tax would have saved high earners thousands of pounds a year during the cost of living crisis

What was in the Chancellor’s ‘mini-budget’?

Last week Mr Kwarteng announced a ‘mini-budget’ of measures he said would improve growth and lead to people keeping more of their money.

The Chancellor announced that from April 2023 the Basic rate of income tax would be slashed from 20% to 19%, instead of April 2024 as was previously mooted.

He scrapped the planned rise of corporation tax, meaning it will stay at 19% and no longer go up to 25% next year.

He also announced the reversal of the 1.25% in National Insurance that had come into effect in April this year under previous Chancellor Rishi Sunak.

There were also plans announced to lift the stamp duty threshold  and a freeze in energy bills that will cost an estimated £60billion over the next six months.

Among the more controversial policies announced was that the limit on bankers’ bonuses would be scrapped and that 120,000 more people on Universal Credit would be asked to look for more work or face benefit sanctions.

But the most controversial was the announcement that from next April the 45p income tax rate on those earning more than £150,000 a year would be axed.

What is income tax?

Everyone earning more than £12,571 a year has money taken from their salary in the form of income tax, which the Government uses to fund public services.

The UK has a ‘progressive’ income tax system, where the more money you earn, the more you will be taxed.

Based on the amount of money they are receiving, people’s income falls into one of four bands:  Personal Allowance, Basic rate, Higher rate or Additional rate.

All money up to £12,570 comes under the Personal Allowance, meaning none of it is taxed.

Money between £12,571 and £50,270 falls into the Basic rate – the Government takes 20% of this.

Income between £50,271 and £150,000 falls into the Higher rate, which is taxed as 40%.

The Additional rate applies to all income over £150,000 and is taxed at 45%.

This does not include other taxes such as National Insurance.

What is the 45p rate of tax and who pays it?

The 45p rate of tax applies to people earning more than £150,000 a year.

It sees all income over £150,000 taxed at 45% – meaning that for every pound over this amount, the Treasury takes 45p. 

It affects around 500,000 adults – around 1% of the population – and brings in around £6billion to the Treasury every year.

This would have essentially scrapped the Additional tax rate, making all income above £50,270 taxable at a flat rate of 40%.

The Chancellor argued the move would promote growth by allowing people to keep more of their money and encourage investment in the UK.

What does income tax cut mean for me?

For someone earning around £200,000 the tax cut would save them around £3,000.

This lead to accusations that it was a tax cut for the wealthiest at a time when the country is facing a cost of living crisis caused by rampant inflation and soaring energy bills.

The 45p tax cut would not have affected anyone earning less than £150,000 a year, which is around 99% of the population.

The drop in the Basic rate of tax from 20% to 19%, which has not been scrapped, will affect millions of households.

Someone earning £25,000 currently pays £2,486 in income tax – under the new rules this would drop to £2,361.70, a saving of just over £124.

Why have they performed the U-Turn?

After a barrage of criticism from opposition parties and their own MPs, the Prime Minister and Chancellor announced the tax cut would not go ahead this morning.

The furious reaction was augmented by the worried reaction of the markets, as the pound crashed and mortgage and interest rates shot up following the mini-budget.

The stock market plummeted as the traders were spooked by what they saw as unfunded tax cuts at a time when the Government announced it would be borrowing billions to freeze energy prices.

And in Parliament such was the anger at the proposals that there were suggestions that some Tory MPs could vote against the mini-budget when it is put to the House of Commons.

In a statement Mr Kwarteng said the furore over the abolition of the 45p tax rate was ‘a massive distraction’ from the rest of the mini-budget.

Speaking on morning television today, the Chancellor suggested he had decided to scrap the policy following the reaction and said he was doing so ‘in a spirit of contrition and humility’.

He told LBC Radio that other parts of the growth package had been welcomed but ‘there is this one element, which is the 45p rate, which was, I accept, controversial’ and ‘people have said they don’t like it’.

‘I’m listening, and I get it, and in a spirit of contrition and humility I have said “actually this doesn’t make sense, we won’t go ahead with the abolition of the rate”.’

News Related


Santa Bus returns for 20th year spreading cheer in Central Okanagan

The Santa Bus is back on the streets and on board is Saint ‘Nic and his helper Bernard the Elf, spreading holiday cheer through the Central Okanagan. The fundraiser is ... Read more »

Frigid weather elicit warnings for North Coast inland, Chilcotin regions

Extremely cold weather has prompted Environment Canada to issue two weather warnings for B.C. on Sunday. A high-pressure system is pushing arctic air over B.C.’s Interior towards the coast. 2:44 ... Read more »

Héma-Québec now accepts blood donations from men who have sex with other men

As of Sunday, Héma-Québec will accept blood donations from everyone, regardless of gender and sexual orientation, ending its policy against male donors who have sex with other males. December 4 ... Read more »

Harry Potter and the very special royal coin set: Collectable 50p pieces will be last to feature Queen Elizabeth II

Harry Potter themed coins featuring Hogwarts Express launched by Royal MintThe collectable coin is the final 50p to have Queen Elizabeth II's portrait on itPart of a collection celebrating 25 years since first Harry Potter book came outAlso coins featuring Harry Potter, Professor Dumbledore and Hogwarts castle  Read more »

Fryers fanfare ISN'T a load of hot air! Trendy cookers can be cheaper and more effective than traditional oven, consumer watchdog says

A study showed air fryers are cheaper and can provide tastier meals than ovensWhich? researchers compared popular foods like chicken, chips and broccoli Air fryers have taken the UK by storm as buyers look to save amid rising costs Read more »

Gordon Brown blasts House of Lords as 'indefensible' amid rumours Keir Starmer could rethink plan to scrap upper chamber

Brown to propose an elected alternative called the Assembly of Nations and RegionsThe former PM said a ‘new anti-corruption agency will be set up under Labour’He insisted there would be a ban on second jobs for MPs if Labour wins  This comes amid reports that Starmer may rethink his party’s plans for the Lords Read more »

Yule be beside your elf with these Christmas crackers! This year's top ten festive gags are revealed

This year's No 1 joke was: ‘What type of peas ruin Christmas dinner? MPs' The author of the winning joke, Claire Travers Smith, won £1,500The list was compiled by TV channel Gold, with 2,000 members of public voting No 2: Why does Kate Bush need to turn the heating off? She’s running up that bill Read more »

Letters to the Editor — Dec. 5, 2022

New Yorkers give mixed reviews on the MTA possibly raising fares. Paul Martinka The Issue: The MTA’s claim that it needs to raise fares in order to return to pre-pandemic ... Read more »

George Clooney's wife Amal dazzles in sparkling silver gown as the couple lead the stars at the 45th Kennedy Center Honors in Washington, D.C.

George Clooney and his wife Amal brought plenty of glamour to the red carpet at the 45th Kennedy Center Honors in Washington, D.C. on Sunday. The Lebanese-British lawyer, 44, dazzled is sparkling ... Read more »

Another blow for rollercoaster victim Shylah Rodden as cruel trolls target her after she woke up from her coma unable to communicate following the accident that shocked Australia

A woman struck by a rollercoaster has awoken after being in a coma for months Her condition update has sparked trolls posting savage social media comments Shylah Rodden, 26, was hit by a ride at the Royal Melbourne Show in September She suffered brain damage and horrific injuries to her pelvis, arms and back Read more »

Covid boosters urged as hundreds of thousands at risk yet to get jab

Hundreds of thousands of people considered at risk from Covid-19 are yet to get a booster (Kirsty O’Connor/PA Wire) Hundreds of thousands of people at high risk of falling seriously ... Read more »

Children growing up in households with domestic abuse to be recognised as victims

Christmas normally sees an increase in domestic abuse (PA Wire) Children who grow up amid domestic abuse will be treated as victims and given specialist support even if they were ... Read more »

Christmas dinner cost rose three times faster than wages this year

The cost of Christmas dinner has risen three times faster than wages this year, a study has found. Research from the Trades Union Congress (TUC) shows prices for traditional Christmas ... Read more »

SBF Publicly Punts on U.S. House Hearing Invitation

Lawmakers wanted the disgraced cryptocurrency exchange founder to testify about the collapse of FTX. Read more »

Houston City Council delays music event ordinance

One council member wants a legal explanation and a broader approach to safety concerns after 2021 Astroworld Festival tragedy at NRG Park Read more »

UCLA beats Oregon for fourth win in a row

Jaylen Clark and freshman Amari Bailey scored 14 points each and No. 21 UCLA rallied in the final four minutes to hold off Oregon 65-56 on Sunday for its fourth ... Read more »

Former Brooklyn prosecutor cops to role in nationwide marijuana ring: feds

Former prosecutor Ramy Joudeh admitted in Brooklyn federal court that he helped run a nationwide marijuana distribution ring. Photo by KENA BETANCUR/AFP via Getty Images A disgraced former Brooklyn prosecutor ... Read more »

11 blocks of Fifth Avenue become ‘car-free’ holiday shopping plaza

A prime holiday shopping stretch in the city — Fifth Avenue between 48th and 57th streets — went “car-free” for the first of the days Sunday, outraging cabbies while delighting ... Read more »

Photo in Harry and Meghan’s Netflix trailer used to illustrate paparazzi hounding them actually showed invited photographers taking pictures at a Harry Potter film premiere in 2011… five years before the couple had even met

Image shows photographers purportedly snapping pictures of the SussexesHowever, they were actually alongside the red carpet at a Harry Potter premiereJK Rowling, Daniel Radcliffe and Emma Watson all attended event in July 2011That is five years before Harry and Meghan were first introduced in 2016 Read more »

ABC hunk Tony Armstrong reveals his big plans to start a family after setting the record straight on 'secret marriage' rumours

Tony Armstrong says he would love to have children. The 32-year-old spoke about his strong desire to start a family in an interview with New Idea on Monday. The TV star, ... Read more »

Video: Pete Davidson covers his face with a hood as he makes a very low-key exit from Emily Ratajkowski's home in New York City

Read more »

Video: Florence Pugh commands attention in a pink satin dress with a dramatic sheer cape at the British Independent Film Awards

Read more »

Union barons fund Labour trio's £7,000 jaunt to Spain so they can meet counterparts in Madrid

Trades Union Congress paid almost £7,000 for three-day junket to MadridThe Labour MPs logged the trip on register of interests They went to meet Spanish union chiefs and government officials Read more »

England World Cup success could be ‘key factor’ in Christmas coronavirus rates, scientist says

The level of success enjoyed by England men’s football team in the World Cup could be a “key factor” in determining rates of coronavirus over the Christmas period, an epidemiologist ... Read more »

Charlie Cox Compares Daredevil's Relationships With Karen Page And She-Hulk

Netflix/YouTube Charlie Cox has fans excited for his return as the titular hero in “Daredevil: Born Again,” and many of them are curious to know as much as they can ... Read more »

Michelle Mone accused of trying to 'bully' ministers over £200m PPE contract

Baroness Mone was branded a ‘right pain in the a***’ over claims she hard sold companies who could provide PPE to the government (Picture: PA Wire) Tory peer Michelle Mone ... Read more »

Rail bosses hope to see off winter strikes with 8 per cent pay offer

General secretary of the RMT Mick Lynch has said the offer fails to meet his union’s criteria (Picture: PA) Railway bosses have made an attempt to avert Christmas strikes over ... Read more »

Brad Pitt and Margot Robbie on Damien Chazelle’s Hollywood epic ‘Babylon’

Margot Robbie and Brad Pitt play characters based on Clara Bow and John Gilbert in director Damien Chazelle’s new movie “Babylon.” Photo by Jesse Grant/Getty Images For Paramount Pictures ‘Babylon’ ... Read more »

Hawks drama boils as Trae Young skips game after Nate McMillan ‘exchange’

The tension between Hawks point guard Trae Young and head coach Nate McMillan is heating up. On Friday’s shootaround, McMillan and Young reportedly had an exchange that resulted in Young ... Read more »

Tom Daley shows off his edgy sense of style in a uniquely patterned suit as he poses arm-in-arm with husband Dustin Lance Black at British Vogue's Forces For Change dinner

Tom Daley showed off his unique sense of style as he stepped out with his husband Dustin Lance Black to the British Vogue Forces For Change dinner at The Londoner Hotel in ... Read more »

Pete Davidson covers his face with a hood as he makes a very low-key exit from Emily Ratajkowski's home in New York City

Pete Davidson kept a low profile as he left Emily Ratajkowski’s home in New York City on Sunday. The former SNL performer, 29, covered half of his face with the ... Read more »

Zoe Saldana exudes elegance as she showcases her sleek figure in a sleeveless black gown at British Vogue Forces for Change dinner in London

Zoe Saldana exuded elegance as she attended the British Vogue ‘Forces For Change’ dinner Sunday in London. The 44-year-old actress, who stunned in a sheer black ensemble at the Avatar: The ... Read more »

Video: Beauty scientist: These are the five things I wish I knew about my skin in my 20s - and everyone is guilty of one of them

Read more »

Elon Musk alleges disgraced former FTX crypto exchange CEO Sam Bankman-Fried donated over $1B to Democrats and asks 'Where did it go?'

Failed crypto exchange boss Sam Bankman-Fried was revealed to be one of the largest donors to Democratic politicians during the last election cycle He recently claimed to have donated just as much to Republicans but via dark channels so the money is publicly untraceable Twitter owner Elon Musk has now submitted that SBF in fact funded Democrats closer to the tune of $1billion and is asking where that money went Bankman-Fried stands accused of funneling customers' funds from FTX to his other crypto trading firm, Alameda ResearchThe U.S. Department of Justice has called for an independent investigation into FTX's bankruptcy filing following allegations of fraud and misconduct  Read more »

Irina Shayk teases her pert derriere in a sheer black dress at British Vogue's Forces For Change dinner in London

Irina Shayk bared quite a bit of skin while at British Vogue’s Forces For Change dinner in London on Sunday. The 36-year-old model, who has lately been rumored to be reconciling ... Read more »

EastEnders actor Jack Ryder looks unrecognisable from his former character Jamie Mitchell 20 years after he was killed off of BBC soap

EastEnders fans have been left shocked at how different former cast member Jack Ryder looks today, 24 years after he first appeared on the soap. The actor – who was ... Read more »

Read the damning report that reveals how renters are being FLEECED by the most out-of-control price rises ever - with every Australian capital becoming increasingly unaffordable

Rent is becoming increasingly unaffordable in every major Australian cityInflation and interest rates are seeing prices shoot up for both units and housesWomen, single parents and pensioners are among the most affected by it   Read more »

'I love to entertain!' I'm A Celeb's Scarlette Douglas swaps TV presenting for pop music and plans to release her first single in 2023

She appeared in the I’m A Celebrity… Get Me Out of Here! jungle alongside pop icon Boy George. And Scarlette Douglas, 35, has said she now hopes to follow in his ... Read more »

EXCLUSIVE: Troubled brother of Aussie World Cup star Garang Kuol who almost scored in dying seconds of loss to Argentina taunts authorities as he sips champagne on Sydney Harbour after skipping bail on fraud charges

Kuol Mawien Kuol is the brother of soccer stars Garang, 18, and Alou Kuol, 21 Former bank employee accused of stealing more than $121,000 from customers  Kuol has acted as player manager to his little brother, who plays for the Mariners Garang Kuol almost become a Socceroo hero on Sunday against Argentina  Kuol was pictured on Darling Harbour with his other famous brother Alou Kuol  Read more »

Sea cows in the Sunshine State: What it's like to swim with manatees in Florida

Crystal River on Florida’s Gulf coast is the only place in North America where you can legally swim with these unusual but delightful creatures (Picture: Shutterstock / Thierry Eidenweil) Bloop! ... Read more »
Breaking thailand news, thai news, thailand news Verified News Story Network