Half of Kwarteng’s cuts to personal tax will go to richest 5%, say experts
Almost half of the personal tax cuts in the mini-budget will go to the richest 5% of the population, according to analysis by leading economic thinktanks.
Highest earners will gain the most from Kwasi Kwarteng’s giveaways after the chancellor cut the top rate of tax for people paid more than £150,000 from 45p to 40p – although big earners in Scotland will not benefit from this.
The better-off will also benefit from cuts to national insurance payments and an across-the-board reduction in the basic rate of income tax, which will be cut from 20% to 19%, due to take effect next year.
The Institute for Fiscal Studies (IFS) said the net effect on someone earning £1m would be a £40,000-a-year gain, reversing the more progressive tax changes planned by the former chancellor Rishi Sunak.
“Taken together, today’s measures undo much of the tax rises introduced by Johnson and Sunak, and undo all of them for the highest-income households,” it said.
“The losses for middle- and higher-income households from previously introduced policies will be roughly halved by today’s measures.”
The richest tenth of households, who were set to lose about 3% of their annual income, or £3,500 a year, in 2025-26 under Boris Johnson and Sunak’s plans, would now gain around £700 a year – or 1% – on average, it said.
The IFS director, Paul Johnson, said he was dismayed that the impact of the measures, including cuts to stamp duty on home purchases and a reversal of planned increases in corporation tax, had escaped analysis by the Treasury’s independent forecaster, the Office for Budget Responsibility (OBR).
He said: “Kwarteng has shown himself willing to gamble with fiscal sustainability in order to push through these huge tax cuts.
“He is willing to shrug off the
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