UK drops tax cut for top earners in budget U-turn

UK Prime Minister Liz Truss (Image source: AP/File)

Britain on Monday scrapped plans to axe its top income tax rate just 10 days after a debt-driven budget sparked turmoil on markets and fierce criticism during a cost-of-living crisis.

On the second day of the ruling Conservative Party's annual conference, finance minister Kwasi Kwarteng tweeted he was "not proceeding" with the removal of the top 45-percent income tax rate, adding it had become a "distraction".

The announcement also marked the first major policy U-turn under British Prime Minister Liz Truss, who took office less than one month ago.

"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 ... rate.

"We get it, and we have listened."

The announcement also came after former cabinet ministers Grant Shapps and Michael Gove voiced opposition over unfunded tax cuts unveiled by Kwarteng in his controversial mini-budget on September 23.

Kwarteng had proposed to remove the 45-percent rate applied to Britons earning more than £150,000 ($167,400) per year.

The so-called mini budget had sent the pound plunging to a record dollar low and sent bond yields spiking on fears of a borrowing splurge.

The budget included a costly freeze on energy bills for individuals and businesses, in an attempt to cushion fallout from key gas producer Russia's invasion of Ukraine.