16 October 2026
If you are covering the news around the expectation the government will increase the tax it charges on profits made by banks in the UK, please find below a comment from Will Howlett, financials analyst at Quilter Cheviot:
"With the runup to the Budget and the rumour mongering that comes with it now in full flow, the government seems to be giving the UK’s banking sector some mixed messages. John Healey has called the UK’s banks a ‘jewel in the crown of the economy’, yet briefings suggest they are going to get hit by a fresh increase in the levy on its profits.
"The banks did manage to escape such measures last year, but with higher interest rates now expected for longer, the government may be thinking now is the time they can strike, especially if they want to limit the number of personal taxes they go after at the budget. The government is facing increased fiscal pressure as a result of the Middle East shock, and while economic growth is solid just now, this would appear easier pickings to help bolster the public finances.
"That said, much of this is reflected in valuations, with UK domestic banks already trading at a discount to European peers. That may explain the relatively muted reaction to share prices this morning. More domestically focused banks, like Lloyds and NatWest have seen drops in their share prices of around 2%, although this is far smaller than the approximately 6% hit you would see if the surcharge were raised by 5 percentage points back to the 8% where it stood previously. Much of the bad news is already priced in at a time where the banks are also able to absorb such a hit thanks to the profits they are making at the moment as a result of higher interest rates.
"It is uncertain whether international banks will be hit or not, and it would be unfair if only UK headquartered banks suffered, but those with more overseas earnings should be more insulated. As such, the likes of HSBC, Standard Chartered and Barclays will be in a better position."
