Banks step up lobbying over threat of Reeves tax hikes

The total tax rate levied on British banks has risen again this year, according to a report by an industry trade body that will underpin warnings about threats to the City's international competitiveness ahead of next month's budget.

Sky News has learnt that a study by UK Finance will show that the disparity between the tax rate paid by London-based banks - with a total tax rate of 46.4% - and those in rival financial centres such as Amsterdam, Frankfurt and New York has also widened this year.

UK Finance's report will be made public on Wednesday, weeks before Rachel Reeves, the chancellor, delivers a budget which speculation suggests will include additional bank-specific taxes as she seeks to plug a fiscal gap estimated at up to £30bn.

According to the trade association's document, the total tax rate applied to London-based banks this year is almost precisely two-thirds higher than that applied to their New York-based peers, whose equivalent figure was 27.9%.

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The UK figure of 46.4% was 0.6 percentage points higher than in 2024, largely because of the increase in employers' national insurance contributions, which came into effect in April, the report will say.

It projects a further increase in the UK figure in 2026 to 46.6% - with the trend likely to exacerbate concerns that London is losing ground to its major international competitors.

In total, the UK banking industry paid £43.3bn in tax to the exchequer in the year to the end of March 2025, according to an estimate in the report.

That figure is nearly one-third higher than the contribution of £33.4bn in 2014, the first year for which comparable figures were compiled.

Produced in conjunction with PwC, the professional services firm, the report will also conclude that the removal of bank-specific taxes in the UK - which exist in the form of the Bank Levy and a 3% corporation tax surcharge - would reduce the total tax take rate for next year to 40%.

That would still be higher than in Dublin, Frankfurt, and New York, although it would be lower than Amsterdam's 42.2% rate calculated in the report.

The Bank Levy was introduced in the aftermath of the 2008 financial crisis by George Osborne, the chancellor during the 2010-2015 coalition government.

Industry executives have been calling for its removal, but accept that Britain's fiscal position means that a reduction in banks' tax liabilities is unlikely to materialise for years.

In an accompanying letter to Ms Reeves seen by Sky News, David Postings, UK Finance's chief executive, reiterated a warning about the competitiveness of Britain's banking sector.

"Uncertainty and speculation regarding potential tax increases have already caused negative market reaction, which is harmful to the UK's ability to attract international investment," he wrote.

"There also appears to be a view in some quarters that the industry is sanguine about a rise in taxation.

"I should like to put on record that this is not the case.

"The industry understands the fiscal issues the government has to deal with, however, as the report shows, it already shoulders a significant burden that renders the UK much less competitive when it comes to attracting capital."

Earlier this week, Sky News revealed that David Solomon, the Goldman Sachs chief executive, had urged the chancellor not to increase bank taxes in the budget during a private meeting last week.

Mr Postings added in his letter to the chancellor that the banking industry "agree[s] with you that the best way to strengthen the public finances is by growing the economy, and a strong financial services centre is a critical component".

"Our sector underpins investment, business growth and homeownership across the country and is crucial to help achieve positive outcomes for pensioners and savers."

UK Finance declined to comment on the contents of its report or the letter to Ms Reeves.

(c) Sky News 2025: Banks step up lobbying over threat of Reeves tax hikes