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Telegraph
8 hours ago
- Business
- Telegraph
Raising capital gains tax again will backfire, Reeves warned
Another capital gains tax raid in the next Budget would 'backfire' on Rachel Reeves and cost the Treasury money, experts have warned. The Chancellor is under pressure to launch a fresh round of tax hikes after raising the top rate of capital gains by four percentage points last year. However, if capital gains rates rise again, anyone selling assets for a profit may choose to delay crystallising their gains or find ways around the tax, which would lead to a loss of revenue for the Exchequer. Tax advisers have warned that a large proportion of capital gains revenues derive from a small number of taxpayers, meaning a significant increase in the rate could 'distort their behaviour', and reduce tax receipts. HMRC estimates suggest that just 2,000 individuals with gains of £5m or more accounted for 37pc of the capital gains subject to tax in 2022-23. Chris Etherington, of accountancy firm RSM, said: 'Given that a significant amount of annual capital gains derive from such a small tranche of the population, it is far from guaranteed that a significant increase in the rate would translate to a windfall of additional tax receipts. 'The Chancellor will no doubt be mindful of the potential risks presented by a further capital gains tax rate rise and may be wary of tax policy changes that could backfire.' In last year's October Budget, Ms Reeves raised the main rates of capital gains tax from 10pc to 18pc for basic rate taxpayers, and from 20pc to 24pc for higher rate taxpayers. She also stripped back relief offered to those selling companies or shares. In March, the Office for Budget Responsibility, the fiscal watchdog, warned that the decision would leave a £23bn hole in the public purse as investors hold off from crystallising gains. Speculation mounted in the lead-up to the Budget that capital gains would be aligned much more closely with income tax, with rates as high as 39pc being modelled by Treasury officials. Households are bracing for a slew of tax rises after the Office for Budget Responsibility (OBR) halved the country's growth forecast for this year to 1pc. Low growth and high borrowing costs could force Ms Reeves to raise taxes again in what the Institute for Fiscal Studies think tank has warned could be a 'blockbuster Budget'. Capital gains tax receipts fell to £13bn in the year to March 2025, down 10pc from £14.5bn in the same period last year, according to HM Revenue & Customs data. The tax accounts for less than 2pc of all government revenue. Nimesh Shah, of accountancy firm Blick Rothenberg, said: 'Capital gains tax revenue comes from a narrow pool of people, so it doesn't take much for that distortion to make an impact – a small change can make a big difference. 'It's an optional tax. You only pay when you dispose of an asset, so people may simply choose to hold on to things like houses, so as not to crystallise the tax bill – or they may simply leave the UK and crystallise the gains abroad. 'Like all taxes, there's a Laffer Curve point with capital gains tax where revenue starts to fall as rates rise.'
Business Standard
2 days ago
- Business
- Business Standard
Sai Life Sciences rises on completion of second phase expansion at Bidar facility
Sai Life Sciences rose 1.82% to Rs 742.45 after the company announced the successful commencement of commercial operations for the second phase of the production block at its Unit IV facility in Bidar, Karnataka. The new phase, which became operational on 19 June 2025, adds approximately 91 kL of production capacity. This marks the second and final phase of the total planned capacity addition of approximately 195 kL at the facility, as disclosed in the companys prospectus. With this addition, the total installed capacity at Unit IV now stands at approximately 640 kL. The expanded facility is equipped to manufacture Registered Starting Materials (RSM), intermediates, and Active Pharmaceutical Ingredients (APIs) for both clinical and commercial applications. Hyderabad-based Sai Life Sciences is a leading global contract research, development, and manufacturing organization (CRDMO) that partners with innovator pharmaceutical and biotech companies to accelerate the discovery, development, and commercialization of new medicines. The company offers integrated solutions spanning medicinal chemistry, process development, clinical and commercial manufacturing, and advanced technology platforms. The company's net profit surged 105% to Rs 170 crore on a 16% increase in revenue from operations to Rs 1,695 crore in Q4 March 2025 over Q4 March 2024.
Yahoo
6 days ago
- Business
- Yahoo
Commentary: Inflation isn't gone. It's just dormant.
If anyone other than Donald Trump were president, inflation would be yesterday's problem. Since peaking at 9% in 2022, the overall inflation rate has declined steadily, hitting a tame 2.4% in May. That's almost at the 2% level the Federal Reserve considers ideal. Goods inflation has disappeared. The last time it was above 1% was September 2023. The cost of appliances, clothing, and electronics is actually declining on a year-over-year basis. Gasoline prices are 12% lower than a year ago. Services inflation is a bit elevated at 3.7%, but this has also been dropping for more than two years. Part of services inflation is the rising cost of labor, which is good for workers. Under normal circumstances, consumers should be enjoying some newfound purchasing power, given that incomes are now growing more than prices. The Federal Reserve should be poised to restart a cycle of gradual interest rate cuts, which it halted last December, lowering borrowing costs for everybody. But inflation isn't licked. It's just dormant. Trump's tariffs on imports are bound to have some inflationary effect, beginning any day now. Trump has raised the average tax on imports from 2.5% to about 16%. That will inevitably raise the cost of some $3 trillion worth of goods Americans buy every year. Economists thought the May inflation data would start to show signs of upward price pressure from Trump's import taxes. Not quite yet. "The April Consumer Price Index is welcome news," Oxford Economics reported on June 11. "However, the boost from tariffs will be more noticeable this summer."What's hard to gauge, for now, is the amount of product inventory retailers have in stock from pre-tariff import orders. Imports surged in the first quarter as American firms stocked up, knowing the Trump tariffs were coming. Then, in April, imports plunged after Trump announced sky-high tariffs. Trump lowered some of those tariffs after financial markets tanked, but trade data for May isn't out yet. So it's not clear just how long the pre-tariff inventories will hold out. Read more: How to protect your money during turmoil, stock market volatility Some economists think signs of tariff pricing are beginning to form. Joe Brusuelas, chief economist at RSM, detects an "emerging sketch" of rising prices caused by tariffs. "Tariff sensitive goods like apparel, electronics and toys are up 0.4% since the beginning of the year and consumer electronics are up 0.5% over that same period," he wrote in a June 11 analysis. Those are small month-to-month changes shoppers might not notice — yet — but they represent a reversal of deflationary trends that were in place before Trump took office. "The price increases will be passed along," Brusuelas said. Most economists expect overall inflation to rise in the coming months. "Tariff-induced inflation will start showing up in the coming months," Moody's Analytics said in its June 11 analysis of the May inflation numbers. Goldman Sachs expects inflation to rise from 2.4% now to around 3.7% by the end of the year. Will shoppers notice? After three years of elevated prices, consumers seem unusually sensitive to any price hikes. And survey data shows they're girding for higher prices caused by Trump's tariffs. The current reprieve is certainly welcome, but it's too early to celebrate inflation's demise. Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman. Click here for political news related to business and money policies that will shape tomorrow's stock prices. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Daily Mail
7 days ago
- Business
- Daily Mail
Under-pressure rate setters on both sides of Atlantic hold the line
Central banks on both sides of the Atlantic will set the course for the direction of interest rates this week as Donald Trump's trade war looms over the global economy. Both the US Federal Reserve and the Bank of England are expected to leave rates on hold when they announce their latest policy decisions on Wednesday and Thursday, but could give clues about the pace of rate cuts to come. Pressure is mounting for Fed chief Jerome Powell and Bank governor Andrew Bailey to act. In the UK, fears that a bright start to the year for the economy could falter are rising after figures last week showed gross domestic product shrank by 0.3 per cent in April, partly blamed on the impact of tariffs as well as Labour's decision to hike employer National Insurance Contributions. Meanwhile, figures showed the UK has lost a quarter of million jobs since autumn's Budget. Bailey recently told MPs that he is sticking to a 'careful' approach to interest rates for now but will act 'aggressively' if needed in the face of global uncertainty. That has helped stoke hopes of a rate cut later this summer. Those hopes could be further lifted if official figures this Wednesday, a day before the Bank's rate decision, show inflation easing as expected. Thomas Pugh, of accountancy firm RSM, said it was a 'sure bet' that the Bank will keep rates on hold at 4.25 per cent on Thursday. But he added: 'Looking ahead, the deterioration in the labour market, weaker economic growth along with inflation... should give the Bank all the cover it needs to cut rates again in August.' In the US, Powell faces a different kind of pressure. While jobs growth has slowed, tariffs have yet to produce a severe impact on economic data, with inflation remaining mild. That has left markets betting that the Fed will continue its 'wait and see' policy on how to respond to the impact of Trump's erratic policy making. But Powell's inaction has displeased the President, with Trump calling Powell a 'numbskull' as he demanded a rate cut. Michael Krautzberger, head of public markets at AllianzGI, said Fed comments 'have highlighted a reluctance to change the policy stance in the near term'.
NBC News
12-06-2025
- Business
- NBC News
Here are the three reasons why tariffs have yet to drive inflation higher
Despite widespread fears to the contrary, President Donald Trump 's tariffs have yet to show up in any of the traditional data points measuring inflation. In fact, separate readings this week on consumer and producer prices were downright benign, as indexes from the Bureau of Labor Statistics showed that prices rose just 0.1% in May. The inflation scare is over, then, right? To the contrary, the months ahead are still expected to show price increases driven by Trump's desire to ensure the U.S. gets a fair shake with its global trading partners. So far, though, the duties have not driven prices up, save for a few areas that are particularly sensitive to higher import costs. At least three factors have conspired so far to keep inflation in check: Companies hoarding imported goods ahead of the April 2 tariff announcement. The time it takes for the charges to make their way into the real economy. The lack of pricing power companies face as consumers tighten belts. 'We believe the limited impact from tariffs in May is a reflection of pre-tariff stockpiling, as well as a lagged pass-through of tariffs into import prices,' Aichi Amemiya, senior economist at Nomura, said in a note. 'We maintain our view that the impact of tariffs will likely materialize in the coming months.' This week's data showed isolated evidence of tariff pressures. Canned fruits and vegetables, which are often imported, saw prices rise 1.9% for the month. Roasted coffee was up 1.2% and tobacco increased 0.8%. Durable goods, or long-lasting items such as major appliances (up 4.3%) and computers and related items (1.1%), also saw increases. 'This gain in appliance prices mirrors what happened during the 2018-20 round of import taxes, when the cost of imported washing machines surged,' Joseph Brusuelas, chief economist at RSM, said in his daily market note. One of the biggest tests, though, on whether the price increases will prove durable, as many economists fear, or as temporary, the prism through which they're typically viewed, could largely depend on consumers, who drive nearly 70% of all economic activity. The Federal Reserve's periodic report on economic activity issued earlier this month indicated a likelihood of price increases ahead, while noting that some companies were hesitant to pass through higher costs. 'We have been of the position for a long time that tariffs would not be inflationary and they were more likely to cause economic weakness and ultimately deflation,' said Luke Tilley, chief economist at Wilmington Trust. 'There's a lot of consumer weakness.' Indeed, that's largely what happened during the damaging Smoot-Hawley tariffs in 1930, which many economists believe helped trigger the Great Depression. Tilley said he sees signs that consumers already are cutting back on vacations and recreation, a possible indication that companies may not have as much pricing power as they did when inflation started to surge in 2021. Fed officials, though, remain on the sidelines as they wait over the summer to see how tariffs do impact prices. Markets largely expect the Fed to wait until September to resume lowering interest rates, even though inflation is waning and the employment picture is showing signs of cracks. 'This time around, if inflation proves to be transitory, then the Federal Reserve may cut its policy rate later this year,' Brusuelas said. 'But if consumers push their own inflation expectations higher because of short-term dislocations in the price of food at home or other goods, then it's going to be some time before the Fed cuts rates.'
