Banks say Healey is planning Budget tax raid on their profits
Senior banking executives have told the BBC they expect to be "on the menu" in the chancellor's Budget tax later this month.
Key points
- UK banks expect Chancellor John Healey to target them for extra taxes in the Budget, with UK Finance warning such a move would hurt competitiveness and growth.
- The four largest banks made about £15bn in the first half of this year, and the sector paid nearly £40bn to the Treasury last year including employee income tax.
- Options include restoring the 3% surcharge to 8% to raise around £2bn a year, or limiting banks' use of past losses to offset profits for an estimated £1bn annually.
UK banks believe Chancellor John Healey is preparing to raise taxes on the sector in the Budget. Healey has called banks part of "the crown jewels" of the UK economy but has refused to rule out a raid.
The four biggest banks made around £15bn profit in the first six months of this year, prompting calls from trade unions and others for additional taxes. The banking trade body UK Finance warned that further increases would weaken competitiveness, discourage investment and job creation, and work against the government's growth ambition.
Current taxes and possible changes
Banks and building societies pay a 3% surcharge on top of the 25% corporation tax rate, plus a levy on balance sheet assets. The sector contributed nearly £40bn to the Treasury last year including employee income tax. The bank levy raised £1.4bn and the surcharge £1.2bn.
The 3% surcharge was cut from 8% under Rishi Sunak when corporation tax rose from 19% to 25%. Returning it to 8% could raise around £2bn a year. The bank levy charges 0.1% on short-term loans and 0.05% on longer-dated loans, with mortgages excluded.
further increases in bank taxes would weaken competitiveness, discourage investment and job creation, and work against the government's ambition to deliver growth in every postcode
— UK Finance
Industry warnings and alternatives
Banks have previously argued that higher taxes would make the UK uncompetitive and reduce lending. They were pleasantly surprised not to be hit in the last Budget, as rising interest rates expanded their lending margins.
Another option discussed with Treasury officials is a moratorium on using past losses to offset profits, which would yield an estimated £1bn a year. One bank executive called it "a lot more bearable". JP Morgan CEO Jamie Dimon warned that further sector-specific taxes could discourage investment and damage competitiveness.
