Jeremy Hunt ‘considers capital gains tax hike’ to fix £50bn black hole

Jeremy Hunt is planning to raise capital gains tax and drastically cut the dividend allowance as he seeks to plug the £50billion hole in the country’s finances, according to reports.

Following the disastrous mini-budget that ultimately saw Liz Truss become Britain’s shortest prime minister, the Chancellor warned again on Thursday that there were “difficult decisions” ahead as the government seeks to “restore stability “.

Speaking after the Bank of England’s biggest interest rate hike since the 1980s, Mr Hunt said families and businesses are “at the top of our minds” as he and Mr Sunak seek to fill the UK’s “massive fiscal black hole” with spending cuts and tax hikes.

Having held talks with George Osborne in recent days as he prepares to deliver his much-anticipated autumn statement in a fortnight, the Chancellor is said to be considering whether to emulate his predecessor’s first budget from the era of austerity with its own raid on capital gains.

Reductions in capital gains tax relief and allowances are the most likely to be approved, but Treasury officials have also put an increase in the headline rate on the table due to the size of the deficit, the The telegraph of the day reported.

Capital gains tax applies to profits from the sale of stocks, personal assets, business assets, and properties that are not your home. It is expected to raise £15bn this tax year, around 1.5% of the total Treasury inflow.

But previous research has suggested that aligning it with income taxes – which are significantly higher – could result in an additional £16billion flowing into the Treasury.

Capital gains tax changes appear to be one of the electorate’s favorite avenues for Mr Hunt to tackle the deficit, with this week’s YouGov poll finding it among the taxes that voters would like to see rise, behind corporate tax and highest income. tax rate.

With the FinancialTimes and Bloombergthe newspaper also reported that Mr Hunt is considering halving or even scrapping the £2,000 tax-free stock dividend allowance altogether, with the latter potentially raising £1billion.

Wealth management firm Quilter told the newspaper that scrapping the dividend allowance would see those at the base rate (8.75 per cent) taxed an additional £175 on their dividends, while others at the higher rate high of 33.75% would pay £675 and those on the additional rate of 39.35% would pay £787.

Mr Hunt reportedly asked officials to review raising each dividend tax bracket by 1.25 percentage points – a week after a report by the Institute for Research on Public Policy think tank (IPPR) has suggested that aligning it with income tax could raise £6 billion.

IPPR’s George Dibb told the Telegraph that while “rumors that the government will remove the dividend tax deduction are welcome”, the Treasury “should go further and start taxing dividends at the same rate as income tax”.

“Not only would this raise billions more to help support households and businesses, but it would also end the injustice that workers pay higher tax on their income than shareholders,” he said. he declares.

However, Craig Beaumont of the Federation of Small Businesses said: “The rise as discussed is another disincentive to becoming an entrepreneur,” adding: “Economic recovery will depend on entrepreneurship. To discourage this group in any other way would be a shortsighted decision on the part of the new chancellor, himself a former entrepreneur.

Along with changes to the capital gains tax regime, the combined effect of the changes could reach the “low trillion pounds”, government insiders told the FT.

Following a meeting between Mr Hunt and Mr Sunak on Monday, a Treasury spokesman said the couple had agreed ‘everyone should contribute more tax in future years’, and on “the principle that those with the broadest shoulders should be asked to bear the heaviest burden”.

Following the Bank of England’s decision on Thursday to raise interest rates by 0.75 points to 3%, The telegraph also reported that the Treasury was not working on a plan to help people facing mortgage defaults.

Meanwhile, The temperature and Reuters both said Mr Hunt was considering a plan to extend windfall taxes on oil and gas companies, with the rate rising from 25% to 30% until 2028.

Mr Hunt said the Bank’s announcement was “going to be very difficult for families with mortgages across the country, for businesses with loans”, saying: “But there is a global economic crisis, according to the International Monetary Fund, a third of the world’s economy is now in recession.

“The best thing the government can do if we want to reduce these interest rate hikes is to show that we are reducing our debt. Families across the country need to balance their books at home and we need to do the same as a government. »

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