# Factbox-The UK’s top tax rate – what is it and why does it matter? Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-10-03 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: British finance minister drops plan to eliminate top income Meta Description: Get the latest on British finance minister's sudden decision to retain the top income tax rate in a move that shook financial markets. URL: https://financedigest.com/factbox-the-uks-top-tax-rate-what-is-it-and-why-does-it-matterhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-10-03t095634z1lynxmpei920fxrtroptp4britain-economy-tax-1736815105282-compressed.jpg) LONDON (Reuters) – British finance minister Kwasi Kwarteng on Monday abruptly dropped his plan to eliminate the top rate of income tax, part of his Sept. 23 “mini budget” that triggered a rout of sterling and government bonds in financial markets. Following are some key points about the 45% tax rate. WHEN WAS IT INTRODUCED? The so-called additional rate of income tax of 50% for incomes over 150,000 pounds ($168,390.00) a [year was introduced in April 2010 by the government of former](https://www.financedigest.com/death-of-former-pope-benedict-overshadows-new-year-at-vatican.html "Death of former Pope Benedict overshadows New Year at Vatican") prime minister Gordon Brown from the centre-left Labour Party. The Conservative-led government of David Cameron [cut the rate](https://www.financedigest.com/oil-gains-as-russian-supply-cuts-temper-concerns-over-rate-hikes-high-stocks.html "Oil gains as Russian supply cuts temper concerns over rate hikes, high stocks") to 45% from April 2013. WHO PAYS IT? The number of additional-rate taxpayers has grown from about 200,000 in 2010 to about 600,000 today as more earners went above the 150,000-pound threshold which has never been raised. The average gain from the planned elimination of the [rate for people paying it would have been about 10,000 pounds](https://www.financedigest.com/beat-the-exchange-rate-and-buy-that-dream-holiday-home-by-paying-in-pounds.html "Beat the exchange rate and buy that dream holiday home – by paying in pounds! ") a year, according to the Institute for Fiscal Studies. Those earning 600,000 pounds a year – the [top](https://www.financedigest.com/2017-cfo-outlook-top-priorities-as-new-year-gets-underway.html "2017 CFO Outlook: Top Priorities as New Year Gets Underway") 0.1% of taxpayers – would have each gained at least 22,000 pounds a year, the think tank said. HOW MUCH MONEY DOES THE TOP [RATE RAISE](https://www.financedigest.com/european-central-bank-to-raise-deposit-rate-to-3-25-by-mid-year-reuters-poll.html "European Central Bank to raise deposit rate to 3.25% by mid-year: Reuters poll")? In terms of revenues, the [top tax](https://www.financedigest.com/top-north-east-financial-adviser-firm-talks-corporation-tax.html "Top North East financial adviser firm talks corporation tax") rate is not a big earner. The finance ministry said getting rid of it would [cost about 2 billion pounds a year](https://www.financedigest.com/commonenergy-mistakes-costing-homeowners-hundreds-of-pounds-each-year.html "Commonenergy mistakes costing homeowners hundreds of pounds each year"), a fraction of the total 45 billion pounds in tax cuts in the mini-budget. The bigger moves included a reversal of higher social security contributions, a [cut in income tax](https://www.financedigest.com/uks-sunak-under-fire-over-cost-of-living-defends-his-tax-cut-plans.html "UK’s Sunak, under fire over cost of living, defends his tax cut plans") for all workers and abandoning a corporate tax hike. SO WHAT’S THE [BIG DEAL](https://www.financedigest.com/big-pharma-may-have-to-reveal-government-deals-in-whos-draft-pandemic-rules.html "Big Pharma may have to reveal government deals in WHO’s draft pandemic rules")? Kwarteng and Prime Minister Liz Truss wanted the [announcement of the cut to underscore their determination to create](https://www.financedigest.com/aon-announces-agreement-to-acquire-risk-management-firm-creating-a-comprehensive-cyber-risk-management-advisory-group.html "Aon announces agreement to acquire risk management firm, creating a comprehensive cyber risk management advisory group") a low-tax, high-growth economy and make Britain more competitive with other economies. Several Conservative lawmakers deplored the [timing of the move](https://www.financedigest.com/move-over-tina-its-time-for-tara.html "Move over TINA, it’s time for TARA") amid a cost-of-living crisis. Many economists said it would do little to [boost growth](https://www.financedigest.com/uk-businesses-call-for-looser-immigration-rules-to-boost-growth.html "UK businesses call for looser immigration rules to boost growth"). For many investors, the decision suggested a shift [away from sound management](https://www.financedigest.com/finance-industry-one-court-case-away-claims-management-company-onslaught-quadient-warns.html "Finance Industry Is “One Court Case Away” from Claims Management Company Onslaught, Quadient Warns") of the budget. IS THE UK A HIGH-TAX ECONOMY? Truss lambasted Rishi Sunak, her rival in the race for the leadership of the Conservative Party, for pushing up taxes to their highest proportion of gross domestic product in 70 years while he was [finance minister](https://www.financedigest.com/scottish-finance-minister-kate-forbes-to-run-for-countrys-leadership.html "Scottish finance minister Kate Forbes to run for country’s leadership"). But even if Sunak’s plans had been introduced, they would have left [Britain’s tax burden](https://www.financedigest.com/britain-plans-new-data-rules-to-ease-compliance-burden.html "Britain plans new data rules to ease compliance burden") lower than a dozen other European countries including France and Germany, according to data from the Organisation for Economic Co-operation and Development. ($1 = 0.8908 pounds) (Writing by William Schomberg; Editing by Andrew Heavens) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---