British banking giants deliver tax rise warning to new chancellor

Britain's biggest banks have fired a renewed warning to the government against hiking taxes on the industry as John Healey, the new chancellor, prepares to deliver his inaugural Budget in October.

Sky News has obtained a letter sent on Thursday by UK Finance, the influential trade body whose members include Barclays, HSBC, Lloyds Banking Group and NatWest Group, in which Mr Healey was told that imposing further tax rises on the banking sector would risk "damaging the UK's international competitiveness".

The letter was sent days after Jamie Dimon, the JPMorgan Chase chief, reportedly told Mr Healey in a telephone call that additional levies on banks would be unwelcome.

Bank lobbying against tax hikes has become a well-trodden path for executives in recent years as higher interest rates and declining provisions for misconduct have helped fuel industry profits.

In recent weeks, trade unions have urged the government to impose a windfall tax on the sector after lenders' half-year results showed strong growth in their profitability.

On Thursday, the Green Party urged Mr Healey to impose a 38% windfall tax in order to fund tax cuts for smaller businesses.

Britain has retained a number of bank-specific taxes - including the bank levy and surcharge - since the aftermath of the 2008 financial crisis which the sector has argued makes the country less competitive than those based in rival financial centres around the world.

Unlike other countries, the UK also retains a ring-fencing regime separating retail and investment banks which imposes significant costs on the big five lenders.

Under Rachel Reeves, Mr Healey's predecessor, the Treasury began to reform ring-fencing rules, although the new chancellor has yet to express a view about whether that overhaul will proceed.

In UK Finance's letter to Mr Healey, David Postings, its chief executive, said the banking sector shared Andy Burnham's administration's desire "to deliver growth in every postcode".

"Banking reaches every part of the economy and every region of the country, providing credit to households and SMEs, supporting investment, and acting as the UK's gateway to global markets," he wrote.

"A strong banking system and a growing economy reinforce each other.

"By working together we can help ensure that the benefits of growth and prosperity are felt by households and businesses up and down the country."

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Mr Postings, whose members also include major international banks, said the industry was "a major source of high-value employment, with more than half of total jobs based outside London, including in Belfast, Birmingham, Bournemouth, Edinburgh, Glasgow, Leeds, and Manchester".

He warned: "In response to recent bank financial reporting there have been calls for an increase in the bank corporation tax surcharge, or some form of windfall tax.

"I should like to put on record the sector's opposition to any such increases.

"I am concerned that increasing taxes on banks would ultimately risk undermining the very tax base the government seeks to protect and grow, as well as damaging the UK's international competitiveness."

The trade association chief pointed out that the total UK tax rate for banks was "already materially higher than our international competitors" at 46.6%, having surged ahead of Amsterdam, Dublin, Frankfurt and New York.

"Moreover, the UK stacks a permanent, non-deductible, balance sheet levy on top of a bank profit surcharge, an internationally uncompetitive double tax on banking capacity," Mr Postings said.

"The direction of travel elsewhere is also important," he added, pointing to recent pledges by the German government to enhance its banking industry's competitiveness.

"Just as the cost of investing and the potential return can influence where investors choose to allocate funds and where companies choose to list, the headline rates and the overall structure of the tax regime play a meaningful role in decisions about where individual banks invest, deploy capital and allocate jobs.

"This is a point that has been made by various chief executives of major international banks.

"The debate needs to recognise both the significant tax contribution already made and the wider economic importance of sustainable profitability."

The banking industry paid more than £43bn in taxes last year, Mr Postings wrote, equivalent to 4.3% of total tax receipts.

He added: "The government's 2025 Financial Services Growth and Competitiveness Strategy rightly set the ambition for the UK to be the global location of choice for financial services firms to invest, innovate and grow.

"While fully recognising the fiscal pressures facing the government, raising what are already high sector-specific taxes would run counter to the wider growth agenda.

"At a time when peer jurisdictions are seeking to improve their competitiveness, it is vital that the UK's approach to both tax and regulation pull in the same direction, supporting investment and the sector's capacity to finance growth across the economy."

(c) Sky News 2026: British banking giants deliver tax rise warning to new chancellor