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(Bloomberg) – Chancellor of the Exchequer Jeremy Hunt plans to cut a surtax on British banks’ profits, effectively shielding them from the bulk of a rise in the country’s corporate tax rate as the government attempts to preserve the competitiveness of the UK financial sector.

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What to expect from the UK Chancellor’s plan to fix the budget hole

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UK banks currently pay an 8% profit surcharge on top of the 19% corporate tax rate. With corporation tax set to rise to 25% from April, Hunt intends to reduce the surtax to 3%, said two officials familiar with the matter, who spoke on condition of anonymity because no decision final was taken.

This means that the overall tax rate on banks’ profits would rise further – from 27% to 28% – but well below the 33% level they would face if Hunt did not touch the surcharge. The City of London had warned that it risked losing out to other financial centers such as Dublin and New York if the bank tax rate rose so much.

A Treasury spokesperson declined to comment on the tax measures ahead of a tax event.

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Hunt is expected to include a bank surcharge announcement when he presents a package of more than £50 billion ($57 billion) in spending cuts and tax increases on November 17, as Rishi’s government Sunak is trying to stabilize Britain’s public finances after the disastrous former term of Prime Minister Liz Truss.

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Banks across the UK have been paying extra tax for more than a decade to reflect the taxpayer support they received during the 2008 financial crisis. A drawdown on their balance sheets raised almost £25bn since its introduction in 2011, while the surcharge has generated just over £8bn since 2016.

When Sunak first announced plans to raise corporation tax to 25% in 2021 – while still chancellor to Boris Johnson – he also pledged to cut the bank surcharge to 3% , leading to speculation that would happen this time around.

But city leaders also feared the pressure to plug Britain’s fiscal hole, laid bare in the market turmoil sparked by Truss’ economic plans, meant Sunak and Hunt might not act on the surcharge.

In his statement next week, Hunt is expected to announce other measures, including an expanded windfall tax on energy company profits, a freeze on foreign aid and an increase in the capital gains tax. values. The Chancellor is also planning to ensure that more Britons pay the top rate of income tax.

(Updates with city fears in eighth paragraph)