Banks in the UK will not face higher taxes in the upcoming budget, according to reports that Chancellor Rachel Reeves wants to maintain stability and support economic expansion.
The news triggered an immediate rally in financial stocks. NatWest shares gained 2.5%, while Lloyds rose 2.3%, placing them among the day’s top risers on the FTSE 100.
Currently, banks pay a total corporation tax rate of 28%, which includes a 3% surcharge imposed on large financial institutions. The surcharge has long been controversial within the industry, which argues it limits competitiveness.
Treasury officials had explored ways to raise extra revenue but ultimately concluded that adding to banks’ tax burden could discourage lending and investment. Maintaining a strong financial services sector was seen as essential to the government’s wider economic goals.
The banking lobby has consistently argued that British banks already face higher effective tax rates than counterparts in other major economies. Industry reports suggest that employer national insurance changes earlier this year further increased costs.
In the last financial year alone, UK banks paid £43.3 billion in taxes — roughly 4% of total government receipts — and this figure has risen significantly since 2014.
Market analysts say Reeves’s decision will be welcomed by investors but could attract criticism from those who believe the sector’s profits are high enough to warrant additional taxation.