Chancellor doubles bank surcharge but promises it will last only 15 months

The UK's bank corporation tax surcharge will double from three to six per cent, applying from January 2027 to the end of March 2028, under a Budget measure the Chancellor has promised will be time-limited. Writing for UK Finance, chief executive David Postings said the Chancellor praised the UK's banks for the tax they pay and the jobs and investment they support before raising the surcharge, and that HM Treasury has said the 15-month limit will be written into legislation.

Postings argued that the increase works against growth and international competitiveness. Banks help people buy homes, back businesses to invest and grow, and already pay billions of pounds in tax a year, he said, describing the sector as a major employer and investor "in every postcode". He warned that the reassurance of a time limit holds only if the government honours the promised end date.

History, he suggested, gives cause for caution. The Energy Profits Levy was introduced as temporary and was originally due to end by December 2025, but its rate has been raised and its duration extended. Sector-specific bank taxation is already established, with the bank levy in place since 2011 and the surcharge since 2016, Postings noted, adding that over the longer term the government should look to reduce that burden rather than increase it.

He pointed to competitors moving the other way. Banks in the EU Banking Union contributed to the Single Resolution Fund until it reached its required level, and no regular annual contributions have been collected since 2024, lowering the total tax rate for banks in countries such as Germany. Germany is also cutting its corporate income tax rate by one percentage point a year between 2028 and 2032, a move its government has said is meant to make the country more competitive and attractive to international investment.

The government's Financial Services Growth and Competitiveness Strategy set the ambition for the UK to be the global location of choice for financial services firms looking to invest, innovate and grow, Postings wrote. A higher and less predictable tax burden pulls in the opposite direction, he argued, and the industry will be watching closely to ensure "a promise made is a promise kept".