Chancellor Healey to lift bank taxes in upcoming budget amid fiscal pressures

What Happened

Chancellor John Healey is set to raise taxes on the United Kingdom’s biggest banks in the budget due in two weeks. He has called banks part of the "crown jewels" of the economy, but senior banking executives say the levy will be "on the menu". The four largest lenders posted about £15 billion profit in the first half of the year, and trade unions are urging a larger tax share.

Reaction

UK Finance warned that higher bank taxes could weaken competitiveness, curb investment and hurt job creation. Sir Philip Augar, former City banker, said a moderate increase could raise up to £3 billion a year and noted that banks are enjoying "booming conditions" thanks to higher interest rates. TUC general secretary Paul Nowak stressed that most bank workers are not "fat cats" and called a fairer tax share "100 % the right call". JP Morgan chief Jamie Dimon warned the UK already bears one of the world’s highest bank tax burdens and that more levies could deter investment.

Options

Currently banks pay a 3 % surcharge on top of the 25 % corporation tax and a separate asset‑based levy that yielded £1.2 billion and £1.4 billion respectively last year. Restoring the surcharge to its pre‑Sunak level of 8 % could bring in about £2 billion annually, while a TUC analysis suggests an 8 % rate would add roughly £2.25 billion. Another proposal is to pause the use of historic loss offsets – a move that could generate an extra £1 billion per year and would mainly affect banks like Lloyds that have relied on past crisis losses.

Context

The tax hike is being considered to offset the fiscal hit from rising defence spending linked to the Middle‑East conflict and to keep the Treasury’s deficit‑reduction plan on track as borrowing costs climb.