UK Treasury chief announces massive tax hike

The increase will affect those who earn more than £125 thousand a year, as well as energy companies. The HEAD of the Ministry of Finance explained that the government will seek to reduce inflation,

The UK is facing serious economic challenges that require a responsible approach to public finances and are forcing the authorities to raise taxes, said UK Chancellor of the Exchequer Jeremy Hunt, speaking in the House of Commons.

“In the face of unprecedented global upheaval, families, retirees, businesses, teachers, healthcare workers and more are worried about their future. Therefore, today we are proposing a plan to deal with the crisis caused by the rising cost of living and to restore the economy,” he said.

The new measures, in particular, involve extending the highest personal income tax rate of 45% to those whose annual earnings exceed £125,000 ($148,000). Now this rate is provided for those who earn more than £150 thousand ($178 thousand) a year.

Hunt also announced an increase in the income tax for energy companies from 25% to 35% from January 1, 2022 to March 2028 against the backdrop of rising electricity tariffs. The government will also impose a 45% tax on excess profits from renewable energy companies from 2023. The authorities expect that these measures will allow to receive £14 billion ($16.6 billion) in the budget.

The finance minister noted that Britain's borrowing in 2022 will amount to 7.1% of GDP, or £ 177 billion, in 2023 - 5.5%, and in 2027-2028 their level will drop to 2.4%.

Earlier that the new Prime Minister of the United Kingdom Rishi Sunak intends to raise taxes "across the board" to patch a hole in the budget in the amount of £50 billion ($57.5 billion), The Financial Times reported.

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FT found outthat Sunak will raise taxes in Britain due to a deficit of £ 50 billion Politics

The UK has experienced a sharp rise in inflation since the beginning of the year due to rising energy prices due to anti-Russian sanctions and the disruption of supply chains in the wake of the covid-19 pandemic . In August, the kingdom recorded a record inflation in 40 years.

A week after Liz Truss officially became UK Prime Minister, the Treasury announced massive deregulation and stimulus measures worth £45bn (about $50bn). The first plan was to cut taxes. In particular, it was supposed to reduce corporate income tax from 25 to 19%, reduce income tax to the same 19%, eliminate the 45% tax rate on excess income of the richest Britons and cancel the increase in the rate of mandatory insurance contributions by 1.25 percentage points. To finance such a sharp increase in costs was supposed to be at the expense of borrowed funds.

On the day of the announcement of this plan, panic began on the stock exchanges: British stocks went down, and the pound almost equaled the value of the DOLLAR. The yield on ten-year British “gilts” (government bonds) reached 4.5% in a few hours (as early as at the end of August it was 2.6%), and the market value, accordingly, decreased. Under attack were the assets of banks and pension funds holding a variety of British securities. On September 28, the Bank of England was forced to announce the start of a government bond buying program totaling up to £5 billion ($5.3 billion) daily until October 14.

After the failure of the economic initiative, Truss canceled the planned tax increase and fired Treasury Secretary Quasi Kwarteng, who was replaced by Hunt. Within a week, she herself resigned.