Chancellor George Osborne announced that the top rate of tax would be cut from 50p to 45p from April next year, in his Budget speech.
He said the rate – for those earning over £150,000 a year – is the highest in the G20 and "it is widely acknowledged as harming the British economy."
The Chancellor said the 50p rate had failed to raise as much for the exchequer as forecast and therefore had to be ditched.
"No Chancellor can justify a tax rate that damages our economy and raises next to nothing," he said.
Meanwhile the corporate business tax rate will be cut by one per cent to 24 per cent from next month.
On the personal tax allowance he said it would rise by £1,100 to £9,205 while the child benefit threshold would be £50,000 rather than £42,000 as touted.
The bank rate levy will be increased to 0.05 per cent.
Continuing on tax Osborne said "I regard tax evasion as morally repugnant".
He announced that stamp duty over £2m would be seven per cent from midnight.
In a controversial move he said from April 2013, those hitting 65 will no longer receive a larger personal allowance than people of working age.
Meanwhile the Chancellor said that Britain is going to earn its way in the world and that financial services should not be "the only string to its bow".
He talked of a reforming Budget to repair a "disastrous" model of economic growth while taxes on the wealthy would rise.
He said red tape would be cut for small companies with a turnover of under £77,000 a year. That will affect three million firms he said.
Meanwhile Osborne said borrowing this year will be £126bn this year and £120bn next year. It will be £21bn by 2016/17.
The Chancellor said that inflation will fall to 1.9 per cent by next year, from the current rate of 2.8 per cent.
Osborne said there would be an automatic review of the pension age, with the costs of pensions soaring as life expectancy rose.
The Government is saving £36bn in debt interest payments compared with the previous administration, he said.
But he said the austerity squeeze would continue with up to £10bn additional welfare savings will be needed by 2016.
He warned that with China, Brazil and India growing the UK needed to stop them "powering ahead".
He said he would work with London Mayor Boris Johnson to improve transport in the capital.
That includes plans to to lengthen train carriages and look at new river crossings. A new £70m development fund will be available in an effort to encourage developers to start work in the Royal Docks.
On entertainment he announced plans to encourage at keeping creative industries in the UK.
But in response Labour leader Ed Miliband said: "Today marks the end of we're all in it together. His plan has failed."
"How can the top priority of a tax cut for top earners. It is a millionaire's budget that squeezes the middle."