A group of challenger banks, including Revolut, Monzo, and Shawbrook, have called on Chancellor John Healey to raise the threshold at which UK lenders are subject to an additional tax. The banks have written to the Chancellor ahead of the Budget, seeking to mitigate the impact of a potential tax increase on their profits.
The cohort, which also includes Investec, Aldermore, and OSB, stated in a letter seen by City AM that while they acknowledge the government's fiscal pressures, an increase in the sector-specific surcharge rate would have a "significantly negative and disproportionate impact on mid-tier and specialist banks and harm investor sentiment."
Currently, the UK banking surcharge is three per cent, bringing the total corporation tax rate for lenders to 28 per cent. Profits up to £100m are exempt from this surcharge, but the group is advocating for this allowance to be increased to £500m. They argue that the current design of the surcharge is "disproportionate relative to the systemic risk posed by mid-tier and specialist banks."
The banks also highlighted the potential for a strong mid-tier and specialist banking sector to contribute significantly to the UK economy's future growth and prosperity. Analysis by the group suggests that this change would cost the Treasury £39m but would still keep surcharge tax revenues "significantly above 2025 levels under all scenarios."
Top executives, including Revolut UK's chief Francesca Carlesi and Monzo's Diana Layfield, signed the letter. Marcelino Castrillo of Shawbrook and Paragon chief executive Nigel Terrington also signed. The group claims to account for 60 per cent of UK lending to small- and medium-sized businesses, underscoring their "central role in financing the everyday economy."
These calls for tax relief come as other groups, such as Positive Money, lobby Chancellor Healey to target banks for revenue generation, suggesting a windfall tax could raise £19bn from the largest four banks alone. Separately, UK Finance, a banking industry body, has also written to Healey, cautioning against any tax increases on the sector. David Postings, the body's boss, emphasised the significant tax contributions already made by the banking sector and its broader economic importance.