The UK's new government on Friday unveiled a multi-billion-pound package to support households and businesses hit by the highest inflation in decades, cutting taxes as the nation heads for recession.

Finance minister Kwasi Kwarteng, fresh from being appointed by new Prime Minister Liz Truss, said caps on soaring energy bills would cost about £60 billion in the first six months.

"The PM has acted with great speed to announce one of the most significant interventions the British state has ever made," Kwarteng told parliament in a so-called mini-budget. "People need to know that help is coming."

In a controversial move as millions of Britons face a cost-of-living crisis, Kwarteng axed an EU-inherited cap on bankers' bonuses following Brexit to bolster the financial services sector.

Kwarteng brought forward a plan to cut the lowest rate of income tax, and reduced the highest to 40 percent from 45.

The chancellor of the exchequer also reversed a planned increase in tax on company profits signed off by Truss's predecessor Boris Johnson.

He had announced on Thursday he would scrap a tax on salaries, reversing a 1.25 percentage-point rise in National Insurance implemented by his predecessor Rishi Sunak.

Opposition politicians slammed the budget as boosting the rich.

"We have had six so-called plans for growth from the Conservatives since 2010 – here they are, a litany of failure every single one of them," said Rachel Reeves, finance spokeswoman for the main opposition Labour party.

"The prime minister and chancellor are like two desperate gamblers in a casino chasing a losing run," she added.

The announcement comes as economists warned that Britain was likely already in recession, as rocketing fuel and food prices take their toll.

Adding to the pain, the pound on Friday plunged two percent against the dollar on intensifying fears of a sharp downturn, while London's stock market also sank.

Sterling hit a fresh 37-year low at $1.1021. (AFP)