UK banks brace for tax hikes in upcoming Budget

UPDATE - follow-up to Banks say Healey planning to increase tax on their profits in Budget: Senior banking executives expect the sector to face higher taxes in the upcoming Budget later this month, following discussions with Chancellor John Healey. The four largest UK banks made about £15bn in profit during the first six months of this year, prompting trade unions to demand additional taxes. UK Finance warned that further tax increases would weaken competitiveness, discourage investment, and work against government growth goals. ## Budget Options and Industry Reaction The chancellor has several ways to raise money from the sector, including reversing a previous corporation tax surcharge reduction from 8% to 3% that was introduced in 2023 by Conservative chancellor Jeremy Hunt. Healey could also raise the bank levy or place a temporary pause on allowing banks to use past losses from the financial crisis to reduce their current tax bills, which could yield an extra £1bn per year. Shares in Barclays, Lloyds, and NatWest fell on Friday due to these tax expectations. JP Morgan chief executive Jamie Dimon warned that the UK already has one of the highest tax burdens on banks globally and that extra sector-specific taxes could harm competitiveness.

Expert Views and Statements

Sir Philip Augar, an author and former banker, told the BBC that room exists for a moderate tax increase that could raise up to £3bn a year, noting that lenders enjoy booming conditions from higher interest rates. Trades Union Congress general secretary Paul Nowak said Britain's four biggest banks make a billion pounds a week with record bonuses, driven by high interest rates and household mortgage struggles, and added that asking them to pay a fair share is the correct call. Chancellor Healey praised banks as part of the UK economic fabric while noting he has tough budget decisions to take. A Treasury spokesperson stated that tax decisions are set by the chancellor at fiscal events rather than through commenting on speculation. ## Context Bank taxes are a frequent target for governments seeking revenue during tight fiscal conditions, especially when financial institutions report high profits while the wider public faces economic pressure. Changes to corporation tax surcharges, bank levies, or loss offsets are standard levers used to adjust the tax burden on the financial sector without altering baseline corporate rates. This ongoing debate balances the need for state revenue against concerns from financial leaders that heavy levies might push investment away from the UK market.