Chancellor Rachel Reeves is expected to keep taxes on banks unchanged in this month’s budget, reflecting her goal of promoting economic confidence and supporting Britain’s financial competitiveness.
The announcement has buoyed the stock market, with shares in NatWest and Lloyds rising more than 2%. The uptick followed weeks of speculation that a new levy could be introduced to raise extra funds for the Treasury.
UK banks currently pay a combined corporation tax rate of 28%, which includes a 3% surcharge on top of the 25% standard rate. The Treasury has argued that this structure already ensures that lenders contribute significantly to public finances.
Officials reportedly decided that a further increase could hurt Britain’s standing as a global financial centre and risk discouraging lending to businesses. The decision reflects a cautious but market-friendly approach to fiscal policy.
The banking industry welcomed the reports, highlighting its existing tax contributions and the potential risks of overtaxing one of the country’s most profitable sectors. UK Finance said that maintaining consistency in tax policy would attract investment and foster growth.
Data from PwC shows the sector’s tax contribution reached £43.3 billion in the latest financial year, up by a third since 2014. The figure underscores the central role banks play in supporting the economy and the Exchequer.
Economists say Reeves’s decision demonstrates her intention to balance fiscal discipline with economic pragmatism. While it may disappoint those calling for higher corporate taxes, it signals a commitment to stability — a key ingredient for long-term growth.