The United Kingdom (UK) government on Monday announced the withdrawal of its September tax cut measures in another emergency move to ensure economic stability and give confidence in its commitment to fiscal discipline. Chancellor of the Exchequer Jeremy Hunt said in a statement that the basic income tax rate is expected to remain at 20% until economic conditions ease. A 1.25 percentage point increase in dividend tax will continue and the VAT-free (value-added tax) shopping scheme for foreign visitors to the country will no longer be rolled out.
Combined with an earlier set of £21 billion (US$23.8 billion) worth of government decisions aimed at increasing corporate tax and maintaining the high 45% income tax rate, the changes are estimated at around £32 billion a year. According to the report.
Hunt said the support scheme for UK households and businesses facing rising energy costs would only run until April next year, after which a Treasury-led review would be carried out to consider what support was needed.
On September 23, the government unveiled the biggest $45 billion tax cut package since 1972 to stimulate economic growth, but the British pound plunged to record lows and government debt soared, sending financial markets into turmoil.
Investors worry that the tax cut measures will increase public debt, bring severe financial uncertainty and increase already high inflation. To calm markets, the Bank of England announced a temporary purchase of long-dated UK government bonds at the end of September, then stepped up operations, increasing the maximum size of auctions and expanding bond purchases. Gilts Coded. The central bank ended these operations on Monday and confirmed it had halted all bond purchases on Friday, noting that “these operations allowed for a significant increase in the sector’s resilience.”
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