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3 October 2022

How does the UK’s 45p income tax rate compare internationally?

There are 10 European countries with higher top tax rates than Britain.

By Katharine Swindells

Kwasi Kwarteng announced today that the government will abandon its plans to abolish the 45p tax rate on earnings over £150,000. The Chancellor’s decision followed polls giving the Labour Party a lead of up to 33 points over the Conservatives and a backlash from former Tory cabinet ministers including Michael Gove and Grant Shapps.

Some Conservatives sought to defend the policy by arguing that the 45p top rate made the UK uncompetitive but an international comparison with countries in the Organisation for Economic Co-operation and Development (OECD) shows that Britain is far from an outlier. There are a dozen countries in Europe with a higher top tax rate. Finland, Denmark and Austria have rates of 55 per cent or more.

Such tax rates tend to correspond with higher-quality public services and lower levels of inequality. In the 2022 World Happiness Report, Finland and Denmark ranked first and second for quality of life, while the UK ranked 17th.

Kwarteng’s U-turn on the 45p tax rate is expected to save the government around £2bn but the decision to press ahead with the remaining £43bn of tax cuts announced in the mini-Budget on 23 September has prompted cabinet ministers to warn that public spending cuts are to come.

[See also: Fear and loathing at the Tory conference]

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