Chancellor Rachel Reeves has reportedly decided not to increase taxes on banks in her upcoming budget, a move that has been met with relief across the financial sector and the City of London.
Shares in the UK’s leading high-street banks jumped following the reports. NatWest rose 2.5%, while Lloyds gained 2.3%, reflecting renewed investor confidence that the government will avoid policies seen as punitive to the financial industry.
The Chancellor has been exploring a range of fiscal measures to strengthen public finances, but advisers reportedly urged caution, warning that raising taxes on banks could harm the UK’s international reputation as a stable financial hub.
UK banks currently pay a 28% corporation tax rate — comprising a 25% base rate and a 3% surcharge applied to major lenders. Despite this, the Treasury still benefits heavily from the sector’s profitability, which has rebounded strongly in recent years.
Industry groups point out that UK banks already contribute more than many of their international counterparts. They also face rising costs linked to changes in employer national insurance contributions introduced earlier this year.
The total tax paid by banks reached £43.3 billion in the most recent financial year, according to PwC estimates, accounting for over 4% of total government revenue. The figure has increased steadily over the past decade.
Reeves’s decision to hold back from additional taxes has been described by analysts as pragmatic, balancing the need for fiscal responsibility with a desire to promote investment, credit growth, and long-term economic stability.