British Chancellor John Healey may increase a tax on bank profits in his Oct. 28 budget, The Guardian reported, setting a potential source of public revenue against lenders’ concerns about credit.
Banks currently face a 3% surcharge on qualifying profits above a banking group’s £100 million allowance. The charge is separate from the 25% main corporation tax rate.
HM Treasury reduced the surcharge from 8% in April 2023, when the main corporation tax rate rose. It said the lower surcharge would help keep Britain competitive internationally. A separate increase in the allowance from £25 million was intended to help small and midsize banks grow.
The Trades Union Congress (TUC) says restoring the surcharge to 8% would raise £2.25 billion a year, but it wants a higher rate. It proposes using additional bank tax revenue for a social energy tariff that would lower household bills. Raising the rate alone would not reverse the increase in the group allowance.
UK Finance, the banking industry group, has warned that another tax increase risks leaving banks with less room to finance households and businesses. The TUC, by contrast, points to strong bank profits in making its case for a higher charge.
Guardian columnist Nils Pratley argued that a modest increase would be manageable for lenders. He cited UBS analysts’ estimates for a 6% surcharge: an average profit decline of about 2% across UK banks, compared with roughly 3% to 4% at Lloyds and NatWest. Those figures describe a scenario, not an announced tax change.
Healey told reporters he had budget decisions to make but gave no indication of his choice on bank taxes. He is scheduled to present the budget Oct. 28.
