Reeves reaps £30bn windfall from wealth taxes

 Rachel Reeves’s raid on wealth has helped the Treasury rake in a record £30bn from capital gains and inheritance tax.

Revenues from the two taxes exceeded £30bn in 2025-26 for the first time, data from the Office for National Statistics (ONS) and HMRC showed.

Inheritance tax receipts for the year rose by £200m to a record high of £8.5bn, while capital gains tax (CGT) receipts climbed by £8.5bn to £22.2bn.

Jason Hollands of wealth manager Evelyn Partners said the significant jump in capital gains receipts was driven by fears that Ms Reeves would raise it to the same level as income tax. He said many people sold assets to avoid the significant jump. 

In the event, the increase in capital gains tax wasn’t as drastic as feared. In her Budget in 2024, the Chancellor increased the lower rate of capital gains tax from 10pc to 18pc and the higher rate from 20pc to 24pc for assets such as shares. 

Meanwhile, Ms Reeves extended the freeze on the £325,000 nil-rate inheritance tax band until April 2030.

Mr Hollands said: “With the Government’s backbenchers resistant to spending cuts and unrest in Downing Street, another summer of speculation about tax rises looks inevitable, and a further hike in CGT cannot be ruled out.”

The wealth tax haul helped Treasury borrowing drop to £132bn during the financial year, which was £700m lower than had been projected by the Office for Budget Responsibility (OBR). Overall, public sector borrowing for the year was £19.8bn lower than in 2024-25.

At the same time, the ONS said the Treasury’s spending to fund its day-to-day activities grew by £65.5bn compared to last year to nearly £1.1 trillion.

Net spending on social benefits increased by £20.7bn to £327.3bn, largely caused by inflation-linked increases to benefits like Universal Credit, and the state-pension triple lock.

04:42pm

Signing off...

Thanks for following our coverage of Rachel Reeves’ efforts to shore up Britain’s finances in the face of the economic chaos caused by the war in Iran. 

As ever, we will keep you up to speed with all the latest here.

04:16pm

US manufacturers boosted by ‘panic’ buying

A surge in “panic” buying drove US manufacturing output to a four-year high in April as the war in Iran rocks markets, new data shows.

American businesses are racing to stockpile before Iran’s blockade of the Strait of Hormuz brings shortages and even higher prices, an S&P Global business survey shows.

Manufacturing output soared to 54.0 in April, up from 52.3 in March, as new orders surged at the fastest pace since May 2022, according to the firm’s US manufacturing purchasing manager’s index (PMI)

But analysts warned that the boom was because businesses are scared they will soon be unable to get hold of goods altogether, rather than because of strong consumer demand.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said: “An expansion of output and orders could be partly traced to the building of safety stocks, with survey respondents reporting ‘panic’ and ‘emergency’ buying ahead of price hikes and supply shortages in echoes of the problems seen during the pandemic.

“Not surprisingly, prices are already spiking higher in this environment, and not just for energy but for a wide variety of goods and services. The overall inflation picture is now the most worrying for almost four years.”

The surge in manufacturing orders meant the composite US PMI, which combines both manufacturing and services, rose from 50.3 to a three-month high of 52.

04:14pm

FTSE 100 recovers after morning losses

The FTSE 100 index started to rebound on Thursday afternoon following a sharp drop in the morning. 

Britain’s leading stock index fell by more than 1pc in the morning session after oil prices surged on Wednesday evening amid the uncertainty surrounding the US-Iran peace negotiations.

However, the FTSE 100 had recovered most of its losses by Thursday afternoon, as the index was lifted by strong gains from mining companies including Anglo American.

It left the FTSE 100 down by around 0.1pc in the final few minutes of Thursday’s session. 

The London Stock Exchange Group, which owns the UK’s main stock market, also lifted the FTSE 100 index after making some of the biggest gains on the index following a strong set of results this morning. 

03:30pm

Gilts suffer worst week since early in Iran war

UK government bonds are on track for their worst week since the early days of the Iran war amid growing pressure on Sir Keir Starmer.

The UK’s benchmark 10-year gilt yield – the return offered to holders of government debt, or bonds – has climbed as much as 0.2 percentage points during the week, which is the most since early March.

It comes amid growing expectations that the Prime Minister will face a challenge to his leadership over the Mandelson scandal and whether he lied to Parliament.

Meanwhile, official data this week have showed rising inflation and a surprise fall in unemployment, prompting traders to increase bets on the Bank of England raising interest rates later this year.

Shane O’Neill of Validus Risk Management said: “Even prior to the war, inflation was running uncomfortably hot. 

“The subsequent surge in energy and commodity prices has only exacerbated this dynamic, forcing a significant repricing of the rates outlook.”

The 10-year gilt yield was last up slightly on the day to 4.92pc.

03:00pm

American Airlines slumps to loss as Iran war pushes up costs

American Airlines revealed it fell to a quarterly loss as it grappled with the impact of the Iran war.

The carrier fell into the red despite record revenues, as costs from winter storms and spiking fuel prices hit its results.

It joined other airlines in citing continued strong travel demand as supportive to earnings, even as it lifts prices to offset some of the jump in jet fuel costs due to the Middle East war.

Speaking on CNBC, American Airlines boss Robert Isom confirmed that fares would rise in the second half of 2026, but pointed to robust demand, especially with premium customers.

“I think that that strength is going to continue as we look out into the year,” he said. “Demand strength is very, very strong.”

02:53pm

Reeves reaps £30bn windfall from wealth taxes

Rachel Reeves’s raid on wealth has helped the Treasury rake in a record £30bn from capital gains and inheritance tax.

Revenues from the two taxes exceeded £30bn in 2025-26 for the first time, data from the Office for National Statistics (ONS) and HMRC showed.

Inheritance tax receipts for the year rose by £200m to a record high of £8.5bn, while capital gains tax (CGT) receipts climbed by £8.5bn to £22.2bn.

Jason Hollands of wealth manager Evelyn Partners said the significant jump in capital gains receipts was driven by fears that Ms Reeves would raise it to the same level as income tax. He said many people sold assets to avoid the significant jump. 

In the event, the increase in capital gains tax wasn’t as drastic as feared. In her Budget in 2024, the Chancellor increased the lower rate of capital gains tax from 10pc to 18pc and the higher rate from 20pc to 24pc for assets such as shares. 

Meanwhile, Ms Reeves extended the freeze on the £325,000 nil-rate inheritance tax band until April 2030.

Mr Hollands said: “With the Government’s backbenchers resistant to spending cuts and unrest in Downing Street, another summer of speculation about tax rises looks inevitable, and a further hike in CGT cannot be ruled out.”

The wealth tax haul helped Treasury borrowing drop to £132bn during the financial year, which was £700m lower than had been projected by the Office for Budget Responsibility (OBR). Overall, public sector borrowing for the year was £19.8bn lower than in 2024-25.

At the same time, the ONS said the Treasury’s spending to fund its day-to-day activities grew by £65.5bn compared to last year to nearly £1.1 trillion.

Net spending on social benefits increased by £20.7bn to £327.3bn, largely caused by inflation-linked increases to benefits like Universal Credit, and the state-pension triple lock.

02:36pm

US stocks slump as Trump issues ‘shoot to kill’ order

Wall Street stocks fell at the opening bell after Donald Trump has issued a “shoot to kill” order for Iranian boats laying mines in the Strait of Hormuz.

The Dow Jones Industrial Average fell by 0.4pc to 49,311.04 as the conflict in the Middle East rages on.

The S&P 500 was down 0.3pc to 7,119.05 after Iran attacked three cargo ships on Wednesday in the strait, capturing two of them.

The tech-heavy Nasdaq Composite declined by 0.4pc to 24,562.63.

02:12pm

WH Smith issues profit warning as Iran war disrupts travel

WH Smith has become the latest major UK brand to flag pressure on shoppers from the conflict in the Middle East.

The past week has seen a raft of household names, also including Primark and Tui, shed light on how consumers and businesses are faring in the midst of heightened uncertainty and cost pressure linked to the conflict. 

WH Smith cut its full-year profit outlook and halted shareholder dividend payouts following the impact of the war on air travel.

It said the conflict has led to pressure on passenger numbers and “weaker consumer confidence”.

Shares were last down 7.2pc.

01:46pm

‘Warning signs are flashing’ for British manufacturers

“Warning signs are flashing” for British manufacturers as the industry reels from the impact of the Iran war.

Manufacturing jobs fell at the fastest pace since the pandemic, data from the Confederation of British Industry (CBI) show, amid rising geopolitical uncertainty.

Employment declined at the fastest pace since October 2020, falling to -19pc in April, down from -16pc in January, according to the lobbying group’s industrial trends survey.

Ben Jones, senior lead economist, said: “Warning signs are flashing in this survey. Sentiment among UK manufacturers is deteriorating at a speed not seen since the pandemic.”

“It’s clear that the war in the Middle East is contributing to rising uncertainty, with supply chains beginning to see some renewed strain and cost pressures intensifying.”

He added that the UK’s high industrial energy costs have left the nation vulnerable to the oil crisis.

The Iran war has choked off shipping through the Strait of Hormuz, sending the cost of oil and gas soaring. It is expected to push up inflation in the coming months.

Optimism about the business situation and export prospects fell to the lowest level since April 2020 as companies remain worried about the impact of the conflict.

Many businesses have cut production or reported a sharp decline in activity as the conflict causes customers to halt new orders.

The proportion of firms working below capacity rose to 73pc, its highest level since July 2020.

The survey adds to a worrying picture for Britain’s manufacturing sector which is grappling with the impact of the conflict in the Middle East.

01:08pm

Rayner government would tank the pound, warns Swiss bank

An Angela Rayner-led government would tank the pound, a Swiss private bank has warned.

Fears of “further ‘tax and spend’ policies” if Ms Rayner became prime minister would send sterling crashing to levels not seen since the Liz Truss mini-Budget in 2022, Union Bancaire Privée (UBP) predicted.

Yields on government bond markets – the rate paid for the state to borrow – would also rise sharply if it looked like Ms Rayner were to become prime minister, the bank’s analysts added.