Following Liz Truss’s surprise statement yesterday that “it was his idea” a sheepish Kwasi Kwarteng announced this morning that the proposed abolition of the 45p rate will not proceed.
He stated that “it is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country.
As a result I’m announcing we are not proceeding with the abolition of the 45p tax rate. We get it and we have listened.”
The rest of the statement focused on the delivery of the Growth Plan and driving supply side reforms. Various further announcements on these are expected over the coming weeks followed by the fiscal statement with full costings currently planned for 23 November.
Whether further U-turns will be coming remains to be seen. The reversal of the Health and Social Care Levy and reversal of proposed corporation tax rate were part of Liz Truss’ election proposals, so it could be assumed these will remain but with this Government’s non traditional approach to fiscal announcements, it is difficult to predict anything with certainty.
Anyone planning to delay bonuses beyond 5 April 2023 to take advantage of the abolition of the additional rates of tax can revert to a delay after 6 November to benefit from the drop in NI.
Dividend tax rates are currently still expected to drop by 1.25% after 5 April 2023 so you may wish to consider delaying these if you can, although with inflation and interest rates high, the tax saving may not outweigh the cash flow delay.