Sterling is losing value due to income tax probabilities.

Income Tax Plans Under Scrutiny

The UK Chancellor Rachel Reeves is revisiting plans to increase the main rates of income tax and other taxes in the upcoming budget. This situation has created uncertainties regarding the closure of the country’s budget deficit, causing the pound to lose value.

Election Pledge and Internal Concerns

According to sources close to the matter, Reeves’ potential violation of the Labour Party election pledge carries some concerns. Therefore, she may take steps to avoid increasing the basic or higher income tax rates.

Exit Tax Under Evaluation

Reeves is also reconsidering whether to implement an exit tax on the wealthy leaving the UK. A source close to the Treasury indicated that the Chancellor is working on two alternative budgets, one of which includes controversial tax increases, while the other foresees minor adjustments and increases in tax law.

Political Pressures and Economic Impacts

According to the source, Reeves, who previously favored the first option, is now under political pressure to consider the second option. Financial Times reported that Reeves could abandon the income tax increase she previously proposed and instead consider lowering the thresholds for income tax rates.

Effects on the Pound

These developments have led to concerns that the government, led by Prime Minister Keir Starmer, may enter a new political arena amid fears of a leadership struggle involving a senior cabinet minister. Following this news, the pound depreciated against the dollar, trading at 1.3140, down by 0.4% as of 07:49 GMT.