After the Chancellor’s shock “mini-budget” on 23rd September, the government announced that it was abandoning its plan to abolish the additional 45% rate of income tax.
The 45% top-rate income tax bracket for people earning over £150,000 was to be scrapped entirely. This has been estimated to cost the Treasury around £2 billion a year.
Described as a tax cut for the wealthy, the Chancellor said the decision to scrap the additional income tax rate “has become a distraction from our overriding mission to address the challenges facing our country”.
While many high earners had planned to make large pension contributions this year to take advantage of their expected future tax cuts, those plans are now upside down.
Given this reversal and the lingering economic consequences and widespread condemnation of the ‘mini budget’, we will wait to see if the £45billion package of tax cuts is reversed or if other developments come before the budget vote. by Parliament.
This reversal by the government underlines that a long-term vision is essential when it comes to tax and estate planning.