The UK plans to raise bank surcharges, but the margin was lower than expected. Bank stocks such as NatWest (NWG.US) and Barclays (BCS.US) rose

The Zhitong Finance App learned that the increase in the UK bank tax will be lower than previously feared. Chancellor of the Exchequer John Healey tried to balance the competitiveness of the City of London with funding to distribute benefits to voters in his first budget. People familiar with the matter said that Healey will raise bank surcharges in the budget. Currently, it will add 3% to the 25% corporate tax, but it will not return to the level of 8% before 2023. This measure will be temporary, not permanent.

As of press release, NatWest Group (NWG.US) shares rose 2.2%, Barclays (BCS.US) rose 2.2%, and Lloyds Bank (LYG.US) rose 1.7%.

Raising bank taxes is one of the key measures Healey will announce in Wednesday's fiscal highlights. He is trying to fund voters' “breathing room” policies — such as heating tax rebates and fuel tax freezes — while firmly controlling the UK's public finances.

The 3% bank surtax raised £1.2 billion (US$1.6 billion) for the UK Treasury in the 2025-26 fiscal year. It is estimated that every 1 percentage point increase could raise an additional £400 million per year.

Healey's plan to raise bank surcharges has been criticized by the industry. The industry has warned that an increase of 8% could reduce economic output by £6 billion within five years, with the biggest impact on regions outside of London. According to a letter from David Postings, head of industry lobbying organization UK Finance, to Healey, the 8% bank surtax will curb loans of about £10 billion by 2029 and reduce investment in the UK.

The Chancellor of the Exchequer's approach to banks stemmed from lobbying by left-wing think tanks and trade unions. They have been urging the Treasury to put pressure on the industry after enjoying recent profiteers, which were driven by rising interest rates.

Barclays reported quarterly pre-tax profit of £2.3 billion on Thursday, up about 12% year over year. The pre-tax profit of HSBC Holdings' UK business also increased 12% during the quarter, reaching £1.8 billion. NatWest and Lloyd will announce their results later this week.

In 2023, then-Chancellor of the Exchequer Jeremy Hunt reduced bank surcharges from 8% to 3% to offset part of the corporate tax increase from 19% to 25% that year. This reduced the overall tax rate for banks in the UK to 28% rather than 33%, otherwise the tax burden on banks in the UK would be higher than elsewhere.