JOHN HEALEY DOUBLES BANK SURCHARGE TO FUND ENERGY SUPPORT

Chancellor John Healey announced in his first Budget that the government will double the surcharge on UK bank profits from 3% to 6%. The increase will start in January and last for 15 months. Banks pay the surcharge on top of 25% corporation tax. Healey said the government would use the money to help fund household energy support. “I am looking to our banks to help fund breathing space for British families,” he said.

The Office for Budget Responsibility forecasts that the increase will raise about £1.5 billion. It expects surcharge receipts to reach £2.4 billion in 2027-28, up £1.2 billion from 2025-26. The watchdog also estimates that banks moving profits out of the UK could reduce receipts by about £190 million, though it says the amount remains uncertain. The energy measures include a cut in VAT on electricity. The government also plans a £100 household energy payment this winter for 20 million households in council tax bands A to D.

Bank shares rose after the announcement: Lloyds and NatWest gained around 3% to 4%, Barclays rose by more than 2%, and Standard Chartered gained more than 4%. The 6% rate fell below an 8% increase that investors had anticipated. The TUC had called for a 16% surcharge, while its general secretary, Paul Nowak, said bank profits showed the sector could contribute more. Shadow Chancellor Andrew Griffith said higher bank taxes would raise borrowing costs and weaken the City’s competitiveness. Bank executives, including Citibank’s Dame Jane Fraser and JP Morgan’s Jamie Dimon, had also raised concerns about further taxes on the sector.