What and why are there changes?
Kwasi Kwarteng has branded the policy to scrap the additional rate of income tax ‘a distraction’ from the government’s wider Growth Plan, backtracking after facing mounting pressure within his own party and a week of volatility in the markets.
The abolition of the 45p rate was announced as part of a government package of measures that sought to reward enterprise and grow the UK economy. However, this particular policy, which would cut income tax for individuals earning over £150,000 from 6 April 2023, has proven controversial.
It is assumed therefore that the additional rate for dividends in 2023/24 will be 38.1%, following the 1.25 percentage point reduction in the other tax rates for dividends from 6 April 2023 announced on 23 September.
As the trust income rate usually mirrors the highest rate of income tax, it is anticipated that the trust income tax rate will also remain at 45%.
No other changes to the government’s announced measures have been indicated.
What Will Change, What Will Not
The additional rate of income tax currently applies at a rate of 45% for income over £150,000. Although it was originally announced in the Growth Plan that this would be abolished from 6 April 2023, this will no longer be going ahead.
The Chancellor also announced in the Growth Plan that the basic rate of income tax would be reduced from 20% to 19% from 6 April 2023. It is understood that this change will still be going ahead, as is the repeal of the Health and Social Care Levy.
The government has promised further detail regarding its wider economic plans in the upcoming fiscal event on 23 November 2022.
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