UK Banks Say Healey Is Planning Budget Tax Raid on Their Profits

3-line summary

• Senior UK banking executives told the BBC they expect the sector to be 'on the menu' when Chancellor John Healey delivers his Budget in two weeks; Healey has called banks part of the economy's 'crown jewels' but has not ruled out targeting the sector. The UK's four biggest banks made a combined roughly £15 billion profit in the first half of this year, prompting calls from trade unions for additional taxes; trade body UK Finance warned that further bank-tax increases would 'weaken competitiveness, discourage investment and job creation.'
• UK banks currently pay a 3% surcharge atop the 25% baseline corporation tax rate, plus a balance-sheet levy (0.1% on outstanding short-term loans, 0.05% on longer-dated loans, mortgages excluded); the sector contributed nearly £40 billion to the Treasury last year including employee income tax, with the levy raising £1.4 billion and the surcharge £1.2 billion. The surcharge was cut from 8% to 3% under then-Chancellor Rishi Sunak when corporation tax rose from 19% to 25%; reversing that cut could raise about £2 billion a year. A separate option under discussion with Treasury officials would limit banks' ability to offset current profits with historical losses — a policy that has particularly benefited Lloyds.

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