Rachel Reeves is expected to avoid a cash grab on Britain’s banking titans in her forthcoming autumn Budget after the industry flagged concerns around international competitiveness.
The Chancellor is understood to be hesitant on targeting the banks for a cash raid after a string of warnings from top industry chiefs on the impact on economic growth.
One person familiar with the matter said: “There’s obviously a list of possible tax measures, but raising taxes on banks is a long way down that list.”
Another person close to the process said: “Banks are already paying a lot of tax. We aren’t going to do it.”
It follows just this week the Liberal Democrats Treasury spokesperson calling for the government to target “big banks” as opposed to “struggling families” in the upcoming Budget.
UK banks faced outsized tax rate
The fresh dismissal, as reported by the Financial Times, follows a report from banking industry body UK Finance revealing the gap between London’s tax rate and its peers had grown.
A study with PwC showed London lender’s total tax rate rose 0.6 per cent to 46.4 per cent in 2025.
This dwarfed that of overseas rivals and has spiked concerns about the City’s attractiveness on the global stage. In New York, the tax rate remained unchanged year-on-year at 27.9 per cent, almost two-thirds below that in London.
The report showed the UK banking sector contributed £43.3bn in tax for the financial year to the end of March 2025, with the rise namely due to Reeves’ increase to employer’s national insurance contributions.
Banks are subject to a sector-specific levy that sits on top of corporation tax as well as VAT, property taxes, national insurance and other taxes levied on businesses.
The top bosses of Britain’s Big Four banks – Natwest, Lloyds, HSBC and Barclays – have sounded the alarm on a bank tax’s implications.
Lloyds’ chief Charlie Nunn has said increasing taxes on lenders “wouldn’t be consistent” with helping boost the economy.
Meanwhile, Natwest chief Paul Thwaite said “strong economies need strong banks” as he argued he would rather use the bank’s capital for loans to boost growth “for the good of the country”.