Banks say Healey is planning Budget tax raid on their profits

Senior leaders within the banking industry have indicated to the BBC that they anticipate the sector will face increased scrutiny when the chancellor delivers the upcoming Budget in two weeks. Despite John Healey emphasizing that banks are among “the crown jewels” of the UK economy, he did not dismiss the possibility of new levies being imposed on the industry.

The four largest banks in the UK collectively earned approximately £15 billion in profits during the first half of this year. This strong financial performance has sparked calls from trade unions and other groups advocating for higher taxes on the sector. However, UK Finance, the trade association representing the banking industry, cautioned that raising taxes further could undermine competitiveness, deter investment, hinder job creation, and counteract the government’s goal of promoting growth across all regions.

At present, major banks and building societies pay a 3% surcharge atop the 25% corporation tax, along with an additional levy based on the assets they hold. In total, the sector contributed nearly £40 billion to government revenue last year when factoring in employees’ income taxes. The bank levy alone brought in £1.4 billion, with the surcharge adding another £1.2 billion to the Treasury’s coffers. The Chancellor has several methods available to increase revenues from banks. One approach would be to reverse the reduction of the surcharge from 8% to 3%, a change implemented by Rishi Sunak during his time as Chancellor, which could generate around £2 billion annually.

Another avenue concerns the current rules allowing banks to offset historic losses against profits, thereby lowering their tax liabilities. This policy, which has notably benefited Lloyds, could be temporarily suspended to boost annual tax receipts by an estimated £1 billion. Some industry insiders view this as a more manageable option. Nonetheless, foreign banks such as JP Morgan have expressed concerns. Jamie Dimon, the bank’s CEO, highlighted that the UK already imposes a high tax burden on banks and warned that additional sector-specific taxes could deter investment and hurt competitiveness. Industry leaders also point out how increasing taxes on UK banks alone, while exempting foreign operations, could contradict government efforts to support British businesses. Regardless of the path chosen, banks sense the chancellor is increasingly inclined to take a larger share from their profits

Read the full article from The BBC here: Read More