Britain’s largest banks are expected to avoid any tax hikes in the forthcoming budget, as Chancellor Rachel Reeves moves to protect the country’s status as a global financial centre.
The news was greeted positively by investors. NatWest and Lloyds shares rose more than 2%, contributing to gains across the FTSE 100 index. Analysts say the rise shows growing confidence that the government intends to provide policy certainty.
The banking sector currently faces a 28% corporation tax rate, which includes a 3% surcharge on top of the standard 25% rate. This makes the UK one of the highest-taxed jurisdictions for major lenders.
Sources suggest the Chancellor believes further increases could drive investment away from London and potentially undermine growth. She is said to view the banking industry as essential to financing innovation, mortgages, and small business expansion.
UK Finance, the main industry body, has argued that the current tax regime already places the UK at a disadvantage compared to cities like Frankfurt and New York. Executives have also warned that frequent fiscal changes discourage long-term investment.
PwC’s research indicates that banks’ total tax contribution hit £43.3 billion last year, making the industry one of the biggest contributors to the Treasury. That total includes corporate taxes, national insurance, and employment-related levies.
Economists say Reeves’s stance reflects her focus on encouraging stability after a turbulent period for public finances. While the decision may frustrate some campaigners, it is expected to reassure markets that Britain remains open for business.