Chancellor John Healey is anticipated to increase bank taxes in his budget next week. This move comes as the Chancellor faces various demands and aims to adhere to fiscal rules.
The likely mechanism for this increase is the bank surcharge, which is applied on top of corporation tax. A potential rise in the surcharge from its current 3% to 8% could reportedly generate around £2bn from the banking sector.
Analysts at UBS have calculated that even a doubling of the surcharge to 6% would result in an average reduction of approximately 2% in UK banks' profits. For domestically focused banks like NatWest and Lloyds, the impact could be around 3%-4%.