UK Chancellor Weighs Bank Tax Rise Ahead of 28 October Budget

Chancellor John Healey is poised to raise taxes on Britain's banks in his budget on 28 October, The Guardian reported. It would be his first budget as chancellor.

Healey is minded to increase the surcharge banks pay on profits, an extra levy charged on top of corporation tax. Industry figures believe a return to 8%, up from 3% at present, is probable.

The discussion comes as borrowing costs threaten to erode the government's financial room for manoeuvre. Analysts have suggested higher costs could as much as halve the £24bn cushion built up against Labour's fiscal rules, self-imposed limits on borrowing and debt, at the March spring forecast. Healey has stressed his commitment to lowering public borrowing ahead of the budget, Reuters reported.

Bank leaders met Healey last week and were given no reassurance that a tax rise had been ruled out. UK Finance and TheCityUK, two industry bodies, wrote to the chancellor warning that higher bank taxes would force lenders to move staff and business out of the country. JPMorgan chief Jamie Dimon said in May he could scrap plans for a new £3bn London headquarters if the UK government became hostile towards banks.

The sector's recent profits are part of the debate. The UK's four largest lenders — HSBC, NatWest, Barclays and Lloyds Banking Group — generated £200bn in pre-tax profits over the past five years. Reversing cuts to the bank surcharge made by former chancellor Jeremy Hunt would raise upwards of £2bn a year. Rachel Reeves, Healey's predecessor, spared the banking sector further tax rises in her 2025 autumn budget.

Healey has declined to say whether he would increase taxes on banks or raise capital gains tax, a tax on profits from selling assets such as shares or property, to ease expected pressure on his budget. He has described Britain's banks as part of the "jewel in the crown" of the UK economy.

Wider economic signals remain mixed. The International Monetary Fund upgraded the UK's growth forecast for 2026 to 1.3%, while saying growth is likely to edge down in the year after 2026. Members of parliament have urged Healey to raise taxes on slot machines ahead of the budget.