Healey confirms banking surcharge increase
Chancellor John Healey has confirmed that the banking surcharge will increase by 3% in order to fund headline measures to reduce energy bills this winter.
That will be on top of the 25% corporate tax rate, and increases the so-called bank levy – a small percentage charged on loans – to 6%. There had been speculation that this would be returned to the 8% level it had stood at until 2023; which was then cut back by the most recent Conservative administration.
Laying out the Labour government’s fiscal plans, Healey prefaced the change by stating that the UK’s “world-leading banks make a huge contribution” to the economy during “global economic storms” and that “I want to celebrate and am grateful for the role you play”.
However, he continued that was looking to the banking sector to help fund “breathing space” for people facing a cost-of-living-crisis.
The move will be time-limited, starting in January and ending 15 months later, Healey clarified.
It comes as banks released healthy financial statements this week.
Barclays admitted tax hikes would be “bearable” as it reported a 12% year-on-year rise in pre-tax profits to £2.3bn.
HSBC posted a 32% rise in third quarter profit on Tuesday, benefiting from favourable interest rates, while avoiding credit losses. Pre-tax profits came in at $9.6bn from July to September, with a planned share buyback of up to $1bn reiterated.
Lloyds is forecast to report a near doubling of its third quarter profit on Thursday, with analysts suggesting the group will show a pre-tax profit of £2.3bn; up from £1.2bn a year ago. NatWest is also expected to report an operating pre-tax profit of £2.2bn.
The surcharge is estimated to deliver a combined 2027 hit of almost £900m for Lloyds, NatWest, Barclays and HSBC.
The existing 3% bank surcharge raised £1.2bn for the Treasury during 2025-26, and each percentage-point increase is estimated to raise a further £400m annually.
Sandy Begbie, chief executive of Scottish Financial Enterprise, commented: “Raising levies on the banking sector is politically expedient, but the truth is increasing taxes on a sector that plays such a key role in driving growth is symptomatic of a desire to prioritise short term popularity over long term economic priorities.
“It sends the wrong message to investors and risks giving the impression that when a business or sector becomes too successful, it automatically becomes a target for the treasury.
“While the time limitation on the increase is a welcome ambition, governments tend to find it harder to wean themselves off such revenue streams once they are introduced and the government should set out a clear path to equalising bank tax to that of other businesses.”
