UK Chancellor John Healey is reportedly planning to increase taxes on the bank sector in the upcoming Budget, according to senior banking executives. The chancellor has described banks as among the most valuable parts of the UK economy, but sector leaders expect the industry to be among the areas targeted for additional revenue. The four largest UK banks together made a profit of approximately GBP 15 billion in the first six months of 2026, and trade unions have called for them to face additional taxes. UK Finance, the trade body for the banking sector, has warned that further tax increases would weaken competitiveness, discourage investment and job creation, and work against the government's growth objectives.
How UK banks are currently taxed
The largest UK banks and building societies currently pay a 3% surcharge on top of the baseline corporation tax rate of 25%. They are also subject to a bank levy, which is calculated on the size of their balance sheets rather than on profits. The levy applies a rate of 0.1% to outstanding short-term loans and 0.05% to longer-dated loans, with mortgages excluded from the calculation. In 2025, the bank levy generated GBP 1.4 billion, while the surcharge raised a further GBP 1.2 billion. When income tax paid by employees is included, the sector contributed nearly GBP 40 billion to the Treasury over the year. The Chancellor has several ways to raise additional revenue from the sector. The surcharge was reduced from 8% to 3% under Rishi Sunak, at the same time as corporation tax increased from 19% to 25%. Returning the surcharge to its former level could raise around GBP 2 billion a year.
Treasury officials have also discussed a different option: restricting banks' ability to offset past losses against current profits. Lloyds has been a notable beneficiary of this rule, using financial-crisis losses to lower its tax bills. Some analysts and bank executives have proposed a temporary moratorium on the practice, which would generate an estimated GBP 1 billion a year. According to one bank executive, the sector would find this easier to absorb than other measures, and it would also spare foreign banks an additional charge.
Competitiveness concerns and calls for higher contributions
Sir Philip Augar, an author and former banker in the City of London, has reportedly said there is room for a moderate increase that could raise up to GBP 3 billion a year. He pointed to higher interest rates, which have widened the margin between what banks charge borrowers and what they pay savers. Paul Nowak, General Secretary of the Trades Union Congress (TUC), said that most bank workers are not high earners and that the TUC supports a successful UK financial services industry. He added that asking banks to contribute a fairer share of tax in the Budget would be the right decision.
Banks have previously argued that higher taxes would make the UK less competitive with other jurisdictions and reduce their capacity to lend. The sector was not targeted at the previous Budget. Jamie Dimon, CEO of JPMorgan, has warned that the UK already has one of the highest bank tax burdens globally and that additional sector-specific taxes could discourage investment. Industry leaders have also said that any measure that hits UK banks while exempting the UK operations of foreign banks would be difficult to reconcile with the government's support for British business.
