The headline announcement in the September Mini Budget was perhaps the removal of the 45% upper rate of income tax on earnings above £150,000 from April 2023.
Despite the fact that the 45% tax rate collected relatively little tax in overall terms, the inevitable backlash from handing the 660,000 richest people in the country a significant tax cut was predictable and massively damaging to the new Chancellor and the whole Truss Government.
The top rate of income tax for those earning more than £150,000 a year was reduced from 50% to 45% by then Chancellor George Osborne from April 2013. Successive Conservative Chancellors may have wanted to get rid of the 45% band, but the perception risk was always too high.
Kwateng wasn’t bothered and just struck it out from April next year, leaving the 40% higher rate of income tax as the new top rate on earnings above £50,270.
The backlash against this tax cut in particular was massive and with the Bank of England immediately increasing interest rates and then subsequently having to step in to bail out the Gilt Markets to support Sterling, amounted to total chaos for the new Government.
On Monday 1 October, at the Conservative Party Conference, The Chancellor did a huge U turn and reinstated the 45% upper tax rate.