Savers, businessmen and shareholders strike as Chancellor Jeremy Hunt to launch £13bn raid on UK PLC
Tough decisions: Jeremy Hunt aims to close the £50bn gap in the exchequer
The chancellor was urged yesterday not to tax companies ‘on the ground’ as he weighs a new raid that could cost businesses and entrepreneurs tens of billions of pounds.
Jeremy Hunt is looking for ways to close a £50bn-plus black hole in public finances.
The latest ideas to come out include changes to the capital gains tax (CGT) that could raise up to £9bn, as well as a restructuring of the dividend tax that could bring in an additional £2bn.
Also potentially in the cards there is pressure on the banks that could deliver 1,800 million pounds sterling. None of the policies have been confirmed by the Government.
But they would add to the burden caused by corporate taxes already raised from 19 percent to 25 percent next April.
Business leaders have warned that new tax raids could stifle growth at a time when businesses are already struggling with rising energy costs, higher interest rates and a looming recession.
Tax experts also warned that the steep increases could backfire by forcing wealth creators to flee the country or take other steps to avoid the extra charges.
Tina McKenzie, policy chair of the Federation of Small Businesses, said: “Filling the hole in public finances cannot and should not come at the cost of taxing small businesses and the self-employed, especially at a time when they are facing so many other headwinds.
“It’s a false economy to kill any chance of recovery and growth until the middle of the decade.”
Roger Barker, director of policy at the Institute of Directors, added: “Business confidence is already at an all-time low, and further pressure on businesses through higher business taxes would do little to revive a more positive business outlook.”
The corporate tax hike to 25 per cent already looks poised to boost Treasury coffers by £12.4bn in 2023-24.
But more tax increases and spending cuts will be needed to close the UK’s huge budget deficit. The CGT rate increase could make a big dent.
The tax is levied on gains made from the sale of investments, including stocks, as well as properties other than the main home.
Currently, the rates vary between 10 and 28 percent depending on the type of asset being sold and the taxpayer’s income.
It has previously been suggested that these should rise closer to income tax rates, which are much higher.
However, accountants at business advisory group Azets believe such a steep increase could mean efforts are made by the wealthy minority who pay the most at CGT to avoid it.
They estimate that, after an increase, the tax could generate £23bn in 2023-24, an extra £9bn.
Chris Sanger, head of tax policy at accounting giant EY, said this should be balanced with tax breaks for those who sell their businesses to avoid the risk of “entrepreneurs preferring to leave the UK rather than stay to become investors.” private”. Meanwhile, a discussed 1.25 per cent increase in dividend tax could generate £1.34bn. But it could hurt business owners who pay themselves through dividends.
Furthermore, halving the level of dividends that are tax-free, currently £2,000, could generate an additional £660m, according to Azets.
Banks could face pressure if an 8 per cent surcharge on their profits is maintained, on top of the 19 per cent corporate tax rate.
That would mean that when corporate tax rises in April, the general rate for banks would rise to 33 per cent, generating an estimated extra £1.8bn, but making London’s tax environment less attractive to investors. financiers than rival cities like Frankfurt, Amsterdam and New York. .
A spokesman for the financial services trade association, UK Finance, said: “We urge the government to consider the surcharge very carefully and not put the competitiveness of the UK banking and finance industry at risk.”
Other plans that emerged for Hunt’s tax return on November 17 include a beefed-up windfall profits tax on energy companies that could raise £40bn over five years.