UK Cancels Wealth Tax Cuts... Highest Tax Rate Repeal Reversed

Twitter Statement of the UK Chancellor of the Exchequer

[Asia Economy Reporter Seungjin Lee] The UK government has withdrawn its plan to abolish the highest income tax rate.

Kwasi Kwarteng, UK Chancellor of the Exchequer, posted on Twitter on the second day of the ruling Conservative Party's annual conference on the 3rd (local time) that they would not pursue the abolition of the 45% top income tax rate.

He stated, "Our growth plan, including support for businesses and tax relief for low-income earners, was a new approach for a more prosperous economy," but also mentioned, "The proposal to abolish the 45% rate has distracted us from our mission to overcome the challenges facing the UK."

Last month, the UK government announced a massive tax cut policy worth ?45 billion (approximately 70 trillion KRW), but it did not present a plan to secure funding to support the tax cuts, causing significant turmoil in the financial markets, including a sharp drop in the value of the pound.

In particular, the proposal to abolish the 45% income tax rate faced strong opposition. If the 45% rate is abolished, the 40% rate will become the highest income tax rate.

In the UK, the income bracket subject to the 45% rate consists of only about 1% of the adult population, approximately 500,000 people, but their tax revenue amounts to ?6 billion (approximately 9.6 trillion KRW).

Within the Conservative Party, voices opposing the abolition of the 45% income tax rate were especially strong among the large-scale tax cut policies promoted by the new Liz Truss government.

Former Housing Secretary Michael Gove expressed concern the day before that the proposal to abolish the 45% rate showed "wrong values," and that increasing government borrowing to finance the tax cuts was uncharacteristic of the Conservative Party.