UK Banks Brace for Budget Tax Raid as Chancellor Healey Refuses to Rule Out Surcharge Hike on Sector's £15bn Half-Year Profits

Senior banking executives have told the BBC they expect the sector to be targeted when Chancellor John Healey delivers his first Budget on 28 October. The four largest UK banks collectively made around £15bn in profit in the first six months of 2026, fuelled by rising interest rates expanding the margin between lending and savings rates. Healey, speaking to reporters in Bangkok on 15 October on the sidelines of the IMF annual meeting, described banks as part of the "jewel in the British economic crown" but declined to rule out changes, saying he has "decisions to take in the budget". The sector currently pays a 3% surcharge on top of the baseline 25% corporation tax rate, plus a levy on balance-sheet assets. The bank levy generated £1.4bn last year and the surcharge a further £1.2bn. The surcharge was cut from 8% under Rishi Sunak when corporation tax was simultaneously raised; returning it to 8% could raise around £2bn a year. A separate option under discussion would restrict banks from using historic losses to offset current profits, a practice that has particularly benefited Lloyds, and could yield an estimated additional £1bn per year. UK Finance, the sector's trade body, warned that further increases would "weaken competitiveness, discourage investment and job creation". JP Morgan chief executive Jamie Dimon has separately warned that the UK already has one of the highest bank tax burdens globally. Industry leaders note that any structure hitting UK-headquartered banks while exempting foreign banks' UK operations would create competitive tension that is difficult to reconcile with the government's pro-growth agenda.

Sign up to read →