Pound rises as chancellor scraps 45p tax cut following market turmoil

The pound has rallied as the chancellor announced a U-turn on abolishing the top rate of tax for the highest earners.

On Monday sterling rose to levels seen before the mini-Budget earlier this month, which sent markets into turmoil with the UK’s largest tax cuts in 50 years.

Kwasi Kwarteng confirmed the move to scrap the 45p tax rate was being abandoned, following more than a week of criticism.

The pound slumped to a record low in the days of market turmoil, sparking fears for the UK economy.

It bounced back overnight as rumours swirled the government was preparing to U-turn on the decision to scrap the higher income tax rate for those earning over £150,000.

Sterling surged to $1.13 at one stage, before dropping slightly to $1.12.

Mr Kwarteng announced the U-turn on Monday morning, saying it had 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 45p tax rate,” he said. “We get it, and we have listened.”

The previous day, Liz Truss said her government remained “absolutely committed” to getting rid of the top rate of income tax.

The U-turn will be seen as a massive blow to their authority, coming a little over a week after the tax cut was announced.

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