Sterling is losing value due to income tax probabilities.

Income Tax Plans Under Scrutiny

UK Chancellor Rachel Reeves is reconsidering plans to increase the main rates of income tax and other taxes in the upcoming budget. This situation creates uncertainties regarding the country's budget deficit, while the pound has depreciated.

Election Promises and Internal Concerns

According to sources close to the matter, the possibility of Reeves breaching the Labour Party's election promise carries some concerns. Therefore, she may take steps to abandon the plan to raise basic or higher income tax rates.

Exit Tax Under Review

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

Political Pressures and Economic Effects

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

Impact on the Pound

These developments have led to concerns that the government led by Prime Minister Keir Starmer could face a leadership challenge from a senior cabinet minister, leading to a new political dynamic. Following this news, the pound depreciated against the dollar, trading at a level of 1.3140, down by 0.4% as of 07:49 UTC.