Chancellor Jeremy Hunt had bad news on Thursday for those on the highest incomes as he announced a reduction to the threshold for paying the top rate of tax from £150,000 to £125,140.
While not a surprise, it marked a sharp about-turn from only a few weeks ago when then-chancellor Kwasi Kwarteng stood up in the House of Commons and announced plans to scrap the top rate of tax as part of a radical bid to boost growth.
The move was widely criticised and Liz Truss’s administration, before it fell apart, was eventually forced into an embarrassing u-turn over the outcry.
Mr Hunt, who was drafted in as Mr Kwarteng’s replacement and kept in post under Rishi Sunak, said on Thursday that he was “asking more from those who have more”.
The move sees the threshold for the 45p additional rate of tax will be cut from £150,000 to £125,140, as part of a wider package of “difficult” tax rises and spending cuts.
Economists and analysts on Thursday were quick to point out the dramatic shift in economic thinking over the course of only a few weeks, as the Institute for Fiscal Studies (IFS) said the change to the 45p additional rate threshold would increase the number of top-rate taxpayers by around 350,000, bringing the total to around one million.
“The swing over a couple of months from Kwasi Kwarteng’s fiscal loosening to a big fiscal tightening is a belated recognition of some harsh fiscal realities,” IFS director Paul Johnson said.
Torsten Bell, chief executive of the Resolution Foundation, said: “The UK Government has gone from announcing the biggest tax cuts in 50 years to the biggest tightening since 2010 in just a few weeks. Today provided the more reality-based version.”