The Zhitong Finance App learned that according to people familiar with the matter, British Chancellor of the Exchequer John Healy will not raise the country's capital gains tax in next week's budget, but will instead rely on taxing bank income to finance the Labour government's plans.
According to a Ministry of Finance official, the Chancellor of Finance has ruled out the possibility of raising taxes on investment income. The official asked for anonymity while discussing details of the upcoming spending plan. The current capital gains tax rate for higher taxpayers is 24%. The decision not to raise this tax was first reported by the British media late Monday.
Although Healy has long decided not to level the capital gains tax with the 45% income tax rate (this is what many political leftists claim), the Treasury has retained the possibility of a smaller, gradual tax increase. This prompted wealthy Britons to rush to reduce their exposure to any tax increases, which financial advisers described as the “number one issue” on the eve of the October 28 budget.
The decision to rule out any capital gains tax increases suggests that Healy is insisting on introducing a less disruptive budget than the previous two budgets under her predecessor Rachel Reeves. The previous budget was alleged to have weakened consumer confidence and reduced recruitment. Like his colleagues around the world, the Chancellor of the Exchequer is dealing with soaring borrowing and energy costs due to the US-led war against Iran.
However, Healy is still considering raising taxes on banks to fund “targeted and temporary” relief measures to help the most needy consumers cope with energy bills fueled by the conflict. According to media reports last week, the move could involve increasing the 3% bank surtax levied on top of the 25% standard corporate income tax rate.
Although Labour MPs, including Secretary of Defense Wes Strittin, are widely advocating a capital gains tax increase, economists warn that such taxes often alter investor behavior and do not generate sufficient revenue.
Former Chancellor of the Exchequer Reeves chose a smaller increase in her first budget, raising the tax rate from 20% to 24% for those earning more than £50,271 ($67,000), while raising the tax rate for low-income earners from 10% to 18%.