Chancellor of the Exchequer Rishi Sunak is set to announce a several percentage point cut in the bank surcharge as early as next month’s budget as he seeks to limit any increase in taxes paid by UK financial firms.
The reduction would not take effect until 2023, when a six percentage point increase in corporate tax goes into effect. When Sunak announced the change in his budget in March, he said the surtax – an additional levy on bank profits – meant “the overall implicit tax rate for banks would be too high,” and promised to Goodbye.
The surcharge could decrease by an amount similar to the increase in corporate tax, a person familiar with the matter said. Speaking anonymously about unannounced plans, they said the Oct. 27 budget was a good opportunity to announce any changes.
City Minister John Glen told the Financial Times on Monday that Sunak was “thinking very carefully” about tax rates on financial services ahead of his budget. A spokesperson for the Treasury declined to comment further.
The prospect of a cut comes at a delicate time for Prime Minister Boris Johnson’s Tory government as it pushes back criticism from opposition parties over the rising cost of living for ordinary Brits and the unwinding of support measures to the coronavirus pandemic.
Inflation is above the Bank of England’s target rate and homeowners face big increases in their energy bills next month, just as the government ends a program to pay workers’ wages on leave and an increase of 20 pounds ($ 27) per week in the Universal Credit Payments benefit. Sunak recently announced plans for a new 1.25% levy on ordinary taxpayers to pay for health and social care.
Sunak, a former banker and hedge fund manager, is also sensitive to the importance of the financial services sector to the UK economy. The sector employs over a million people and contributes about a tenth of the treasury’s tax revenue.
“We will review the surtax, to ensure that the combined tax rate on the UK banking sector does not increase significantly from its current level and to ensure that this important industry remains internationally competitive,” Sunak said in his budget speech in March. . The Treasury said at the time that changes would be planned in the 2021-2022 finance bill.
The 8% surtax was announced in 2015 by then-Chancellor George Osborne and has been in effect since January 2016. Osborne introduced the measure to ensure that banks make a “fair contribution” to the chessboard as it gradually reduced a separate bank levy taken from equity and liabilities on the balance sheets of banks and building societies.
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