Banks Expect Tax Increase in Healey's First Budget
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Banks expect to be hit in Budget tax raid
Image source: Sirachai Arunrugstichai/Bloomberg via Getty Images
By Simon Jack, Business editor
Published 11 minutes ago
Senior banking executives have told the BBC they expect the sector to be "on the menu" when the chancellor announces his Budget in two weeks' time.
John Healey has described the banks as part of "the crown jewels" of the UK economy, yet has refused to rule out a raid on the sector.
The biggest four banks collectively made around £15bn profit in the first six months of this year, leading to calls from trade unions and others for additional taxes.
However, the banking sector trade body, UK Finance, warned that "further increases in bank taxes would weaken competitiveness, discourage investment and job creation, and work against the government's ambition to deliver growth in every postcode".
Currently, the UK's biggest banks and building societies pay a surcharge of 3% on top of the baseline 25% rate of corporation tax, plus a levy on the assets held on their balance sheets.
The sector contributed nearly £40bn to the Treasury last year, if income tax on employees is factored in. The bank levy generated £1.4bn last year and the surcharge a further £1.2bn.
There are several ways the chancellor could extract more money from the sector:
- Returning the surcharge to its previous level of 8% could raise around £2bn a year.
- Adjusting the bank levy currently charges 0.1% on outstanding short-term loans and 0.05% on longer-dated loans.
- Implementing a moratorium on using past losses to offset against profits, which would yield an estimated extra £1bn per year for the Treasury.
Whatever form it takes, banks believe the chancellor now has much more of an appetite to take a larger slice of their pie.