But the Telegraph can reveal that despite soaring mortgage rates and predictions of a sharp fall in house prices, Treasury officials are not planning any extra help for homeowners. There will be no extension of the stamp duty cut adopted by Liz Truss, a Whitehall source told The Telegraph, meaning there will be no additional intervention aimed at boosting house prices. Nor is the Treasury currently working on a new plan to help people facing mortgage defaults, despite some calls for such a move from cost-of-living advocates. A Whitehall source said: “We have a budget hole north of £50bn. We have to cover that with spending cuts and tax increases to try to break even and do the books.” Mr Hunt and Rishi Sunak want to find the money equally between tax increases and spending cuts. The approach means that even though the economy is already in recession, according to the Bank of England, the Treasury is preparing to tighten fiscal policy. On Thursday Mr Hunt acknowledged the difficulties they face: “Today’s news will be very difficult for families with mortgages up and down the country, for businesses with loans. “But there is a global economic crisis, the International Monetary Fund says a third of the world economy is now in recession.” The chancellor also defended his approach, saying: “The best thing the government can do if we want to reduce these rate rises is to show that we are reducing our debt. “Families up and down the country need to balance their accounts at home and we need to do the same as a government.” Mr Hunt is considering raising the tax rate on dividends and reducing the tax-free dividend in a £1bn-a-year tax raid on pensioners, business owners and the self-employed. Under current rules no tax is paid on dividend income of less than £2,000, but Mr Hunt is said to be considering halving the allowance to £1,000 or even cutting it altogether. Abolishing the allowance would raise £1bn for the Treasury every year, according to the Institute for Public Policy Research, a think tank. Craig Beaumont, the FSB’s head of external affairs, said: “Rising as discussed is another deterrent to becoming an entrepreneur. Owner-managers who pay themselves through dividends have been largely left out of pandemic-era income support programs. “Economic recovery will depend on entrepreneurship. To discourage this group in yet another way would be a short-sighted move by the new Chancellor, himself a former businessman.” Basic rate income taxpayers currently pay 8.75% on dividends earned above the allowance, while higher rate taxpayers pay 33.75% and additional rate taxpayers the levy is 39.35%. If the dividend allowance is reduced to £1,000, then a basic rate taxpayer will end up paying £87.50 more in tax, according to wealth manager Quilter. This works out to £337.50 for higher rate taxpayers and £393.50 for additional rate taxpayers. Abolishing the allowance entirely would see a basic rate taxpayer charged £175 in tax on their dividends and cost a higher rate taxpayer £675 and an additional rate taxpayer £787. It comes a week after the IPPR published a paper saying the government should scrap the £2,000 allowance in order to raise tax revenue. The think tank also suggested aligning dividend tax with income tax rates (20% for the basic rate, 40% for the higher rate and 45% for the additional rate). Combined with the removal of the allowance, the IPPR estimates that this will generate £6bn for the Treasury each year. IPPR’s George Dibb said: “Rumours that the government is going to scrap dividend tax relief are welcome, but we think the government should go further and start taxing dividends at the same rate as income tax. No. that alone would raise billions more to help households and businesses, end the injustice of workers paying more tax on their income than shareholders.” The increase in capital gains tax will echo the approach taken by George Osborne when the Conservative-Liberal Democrat Coalition took office in 2010.
