“The removal of the 45% income tax rate was not anticipated before the budget.
There was discussion that the Chancellor may announce some amendments to the income tax rates, including the higher rate income tax threshold being moved to £80,000 - but the removal of the 45% tax band was unexpected.
Even though the government has maintained since the budget that the tax cuts were the correct approach for economic growth, it is not surprising that the government felt compelled to make some amendments to the announced tax cuts given how serious the backlash to the budget has been.
The concerning element of this ‘u-turn’ is that only a couple of days ago Liz Truss and the Chancellor maintained that cutting the 45% income tax rate was the right thing to do, but now they have abandoned these plans.
This calls into question other tax cuts that were announced – will these be reversed too?
Potentially, some of this upset could have been avoided if the government had allowed the OBR to put together their economic projections in respect of the budget, then there would be much more certainty around the budget’s likely effects.”
Source: Katten UK LLP