Mini Budget 2022: The UK government has announced that it will scrap the 45% tax rate on incomes above £150,000 as of 6 April 2023.
Chancellor of the Exchequer Kwasi Kwarteng told the House of Commons that the 45% tax rate would be replaced with a 40% rate in order to simplify the tax system and make the UK more competitive, as the rate is currently higher than the top one in the US, Italy and Norway. He stated that this aims to reward enterprise and work, incentivise growth, and benefit the economy and the country.
Tania Bowers, global public policy director for the Association of Professional Staffing Companies, said: “The planned changes to income tax from April 2023, in particular the abolition of the top rate of income tax for the highest earners… will encourage more individuals back into the flexible labour market to drive growth at end-engagers.”
Richard Godmon, tax partner at accountancy firm Menzies, added: “The biggest surprise was the decision to simplify income tax by moving to a single higher rate of tax for high earners of 40%, with effect from April next year. This will encourage a spirit of entrepreneurialism by incentivising work and putting money back into the economy. The flip side is that the government might also be hoping that the move increases the tax take, as it could help to draw people back to the UK who may have previously chosen to live and work elsewhere, while encouraging others to stay put.”
Ben Willmott, head of public policy for the Chartered Institute of Personnel and Development (CIPD), said: “The government cannot expect tax cuts alone to stimulate growth across the economy. It needs to have a broader plan to boost business productivity by making key reforms to skills and other areas of policy that can boost employers’ investment in training, people management capability and new technology.”