More Britons to pay top income tax rate in budget squeeze

More Britons will pay the top rate of income tax under government plans announced on Thursday to freeze allowances and lower the level at which people start to pay the highest rate as part of measures to stabilise public finances.

Finance Minister Jeremy Hunt said that the newly-installed Conservative government of Prime Minister Rishi Sunak is “asking more from those who have more” as he also set out plans to freeze national insurance and inheritance tax thresholds.

Britain’s Chancellor of the Exchequer Jeremy Hunt walks at Downing Street in London, Britain, November 17, 2022. REUTERS/Peter Nicholls

LONDON, Nov 17 (Reuters) – More Britons will pay the top rate of income tax under government plans announced on Thursday to freeze allowances and lower the level at which people start to pay the highest rate as part of measures to stabilise public finances.

Finance Minister Jeremy Hunt said that the newly-installed Conservative government of Prime Minister Rishi Sunak is “asking more from those who have more” as he also set out plans to freeze national insurance and inheritance tax thresholds.

Hunt said the government would freeze income tax allowances until 2028 and was lowering the threshold above which the 45% top rate of income tax is paid to 125,140 pounds ($148,053) from 150,000 pounds.

The result of the changes is that the income of many more Britons will fall into the new thresholds and end up paying more tax because of the effects of inflation.

“We will still have the most generous set of tax-free allowances of any G7 country,” Hunt told parliament in a speech aimed at restoring market confidence in the government’s finances after the 50-day premiership of Liz Truss.

Her government had said it would abolish the top rate of income tax, before reversing course amid financial turmoil triggered by her plans. She was forced to resign last month and was replaced by Sunak as prime minister.

The Conservatives pledged in their election manifesto 2019 not to raise income tax or national insurance rates.

Hunt said that although his announcement will lead to “substantial” tax rises, the government had not raised the headline rates of taxation.

Source: Reuters