The whole tax price levied on British banks has risen once more this yr, in response to a report by an business commerce physique that can underpin warnings about threats to the Metropolis’s worldwide competitiveness forward of subsequent month’s funds.
UK Finance’s report will likely be made public on Wednesday, weeks earlier than Rachel Reeves, the chancellor, delivers a funds which hypothesis suggests will embrace extra bank-specific taxes as she seeks to plug a fiscal hole estimated at as much as £30bn.
In keeping with the commerce affiliation’s doc, the overall tax price utilized to London-based banks this yr is nearly exactly two-thirds larger than that utilized to their New York-based friends, whose equal determine was 27.9%.
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The UK determine of 46.4% was 0.6 proportion factors larger than in 2024, largely due to the rise in employers’ nationwide insurance coverage contributions, which got here into impact in April, the report will say.
It initiatives an additional enhance within the UK determine in 2026 to 46.6% – with the pattern more likely to exacerbate considerations that London is dropping floor to its main worldwide rivals.
In complete, the UK banking business paid £43.3bn in tax to the exchequer within the yr to the tip of March 2025, in response to an estimate within the report.
That determine is sort of one-third larger than the contribution of £33.4bn in 2014, the primary yr for which comparable figures had been compiled.
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Tax rise hypothesis dominates funds build-up
Produced at the side of PwC, the skilled companies agency, the report may even conclude that the elimination of bank-specific taxes within the UK – which exist within the type of the Financial institution Levy and a 3% company tax surcharge – would cut back the overall tax take price for subsequent yr to 40%.
That might nonetheless be larger than in Dublin, Frankfurt, and New York, though it could be decrease than Amsterdam’s 42.2% price calculated within the report.
The Financial institution Levy was launched within the aftermath of the 2008 monetary disaster by George Osborne, the chancellor through the 2010-2015 coalition authorities.
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Goldman Sachs boss David Solomon has lobbied Ms Reeves on the problem of financial institution taxes
Business executives have been calling for its elimination, however settle for that Britain’s fiscal place signifies that a discount in banks’ tax liabilities is unlikely to materialise for years.
“Uncertainty and speculation regarding potential tax increases have already caused negative market reaction, which is harmful to the UK’s ability to attract international investment,” he wrote.
“There also appears to be a view in some quarters that the industry is sanguine about a rise in taxation.
“I ought to prefer to placed on file that this isn’t the case.
“The industry understands the fiscal issues the government has to deal with, however, as the report shows, it already shoulders a significant burden that renders the UK much less competitive when it comes to attracting capital.”
Mr Postings added in his letter to the chancellor that the banking business “agree[s] with you that the best way to strengthen the public finances is by growing the economy, and a strong financial services centre is a critical component”.
“Our sector underpins investment, business growth and homeownership across the country and is crucial to help achieve positive outcomes for pensioners and savers.”
UK Finance declined to touch upon the contents of its report or the letter to Ms Reeves.
