UK Budget Imminent: Chancellor Reportedly Abandons Capital Gains Tax Hike, Turns to Bank Levy to Raise Funds

UK Budget Imminent: Chancellor Reportedly Abandons Capital Gains Tax Hike, Turns to Bank Levy to Raise Funds UK Chancellor John Healey will not raise the country's capital gains tax in next week's Budget and will instead rely on a levy on bank revenues to fund the Labour government's plans, according to people familiar with the matter. The Chancellor has ruled out raising the tax on investment gains, according to a Treasury official, who requested anonymity while discussing details of the upcoming spending plans. The current capital gains tax rate for higher-rate taxpayers is 24%, and the decision not to raise it was first reported by UK media late Monday. Although Healey had long decided against aligning capital gains tax with the 45% income tax ratea demand of many on the political leftthe Treasury had kept open the possibility of a smaller, incremental increase. That prompted wealthy Britons to rush to reduce their exposure to any tax rise, a situation financial advisers described as the "number one question" ahead of the October 28 Budget. The decision to rule out any capital gains tax increase indicates that Healey is sticking to a Budget less disruptive than the previous two under his predecessor Rachel Reeves. Those Budgets were blamed for weakening consumer confidence and reducing hiring. Like his counterparts around the world, the Chancellor is grappling with surging borrowing and energy costs caused by the US-led war against Iran. However, Healey is still considering raising the levy on banks to fund "targeted and temporary" relief measures to help the most vulnerable consumers cope with energy bills driven up by the conflict. As reported by media last week, the move could involve raising the 3% bank surcharge levied on top of the 25% standard corporate income tax rate. Although Labour lawmakers including Defence Secretary Wes Streeting have broadly advocated raising capital gains tax, economists warn that such taxes often change investor behavior and fail to generate sufficient revenue. Former Chancellor Reeves opted for a smaller increase in her first Budget, raising the rate from 20% to 24% for those earning more than 50,271 ($67,000), while increasing the rate for lower earners from 10% to 18%.