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Mini Budget 2022: Income Tax

Overview

Abolishment of additional rate

The additional rate of 50% was first introduced by the then Chancellor, Alistair Darling, under the Labour government in 2010 but was subsequently reduced to 45% by George Osbourne in April 2013. Since then, individuals earning above £150,000 have been taxed at 45% on income received above that amount. That change would have meant that from April 2023 all income above £50,270 would have been taxed at 40%.

The abolishment of the additional rate combined with some of the other measures announced, such as the scrapping of caps for bankers' bonuses and the reduced regulatory burden for many businesses, certainly pointed to a policy aimed to attracting the highest earners to the UK and incentivising businesses in the financial services sector to base their operations in the UK.

However, given the high rates of inflation, the cost of living crisis and the need to pay back the debts accumulated during the COVID-19 crisis, this abolition was regarded as controversial for much of the UK population. On 3 October, the Chancellor announced that the abolition of the 45p rate would no longer go ahead.

 

Basic rate cut by 1p

The Government also announced today the basic rate of income tax will be cut by 1p (from 20p to 19p) from April 2023.

This measure was first announced by Rishi Sunak in his 2022 Spring Statement and was intended to come into force in April 2024. The new Chancellor has brought this date forward to April 2023.

The Government estimates that 31 million taxpayers will benefit from this change in 2023-24, with an average saving of £170.

 

Return to Mini Budget 2022.

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