Banks across the UK have welcomed signs that the government will not impose new taxes on the sector in the upcoming budget. Chancellor Rachel Reeves is believed to have ruled out higher levies on lenders, hoping to support stability and growth in the wider economy.
Investors reacted swiftly to the reports, sending shares of major lenders sharply higher. NatWest and Lloyds led the charge on the FTSE 100, climbing 2.5% and 2.3% respectively. The rally reflected relief after weeks of uncertainty over possible fiscal tightening.
The Chancellor’s decision comes as she faces mounting pressure to balance the public books while avoiding measures that might discourage investment. Treasury officials reportedly reviewed the profitability of large banks, many of which have seen earnings rise significantly due to higher interest rates.
Currently, banks pay a combined corporation tax rate of 28%, including a 3% surcharge specific to the sector. That surcharge was designed to ensure lenders made an extra contribution after the 2008 financial crisis.
Industry figures have warned that further increases could make Britain’s financial system less competitive compared to rivals in New York, Frankfurt and Amsterdam. The banking trade association UK Finance noted that UK institutions already shoulder higher effective tax rates than many of their peers.
According to PwC’s latest analysis, UK banks contributed around £43.3 billion in taxes in the last financial year — accounting for 4.3% of total government receipts. That figure has increased by roughly one-third since 2014.
Economists say the Chancellor’s restraint sends a message of predictability and confidence to global investors, though critics argue the government may be missing an opportunity to raise extra funds at a time of tight public finances.