The reduction in Britain’s bank surcharge has cost the Treasury an estimated £6bn in potential tax receipts over three financial years, according to calculations by the Trades Union Congress, renewing debate over the sector’s contribution before the autumn Budget.
The Trades Union Congress argues that the decision to reduce the additional charge on qualifying bank profits from 8% to 3% in April 2023 substantially lowered the revenue that might otherwise have been collected during a period of elevated bank earnings.
Its estimate, reported on 9 October, attributes approximately £2.3bn of foregone receipts to 2023/24, £1.7bn to 2024/25 and £2bn to 2025/26. These are the union’s counterfactual calculations, not tax debts left unpaid by banks or a loss independently established by HM Revenue and Customs.
The surcharge is an additional corporation tax charge applied to qualifying banking profits. It is separate from the bank levy, which is calculated with reference to certain bank balance-sheet liabilities and equity rather than annual profits.
The previous government reduced the surcharge in April 2023 when the main corporation tax rate increased from 19% to 25%. Those changes raised the combined headline rate on qualifying banking profits from 27% to 28%, rather than reducing the total headline rate by five percentage points.
At the same time, the annual allowance below which surcharge profits are not subject to the additional charge increased from £25m to £100m for banking groups. That change also affects how the burden falls on different institutions and is relevant to comparisons between the old and new regimes.
The union argues that banks have benefited from higher interest rates and should make a larger contribution to public finances. It has called for changes to banking taxes to support public services and an energy social tariff for households facing higher bills.
Its position differs from that of banking industry representatives, who argue that the tax system must also reflect the international competition facing financial institutions operating in London and other UK centres. They maintain that additional charges can influence decisions about investment, employment and the location of business activity.
Neither argument establishes the precise revenue that would be collected from changing the rate. A historical estimate assuming a different surcharge does not necessarily capture how banking groups might alter investment, profit allocation or other commercial decisions under revised rules.
Official receipts published by HM Revenue and Customs on 1 October provide a separate account of what the sector actually paid or collected through the taxes covered by its statistics.
HMRC recorded £39.1bn in combined banking-sector receipts for 2025/26, an increase of £3.1bn, or 8.5%, from the previous financial year. The total covers payroll income tax and National Insurance contributions, corporation tax, the bank levy and the bank surcharge.
Of that £39.1bn, £26.8bn came through PAYE income tax and National Insurance associated with the banking workforce. Corporation tax contributed £9.7bn, while the surcharge generated £1.2bn and the separate bank levy £1.4bn. The components are rounded in the official release.
The composition of the total is important. Payroll taxes are not an additional levy imposed solely on banks’ profits, and it would be misleading to present the £39.1bn figure as corporation tax paid directly by banks.
HMRC reported that surcharge receipts increased by £0.2bn, or 20.1%, year on year, reflecting higher taxable profits. The official series records cash receipts under the existing tax rules; it does not verify the TUC’s estimate of the extra sums that a different rate might have generated.
The sector’s overall contribution includes several types of tax with different economic effects. A higher surcharge would change the taxation of certain profits, while the bank levy and employment-related receipts respond to different financial and operational factors.
For the Treasury, a decision about surcharge rates must therefore balance the potential for additional revenue against the possible responses of businesses. Estimates of extra receipts depend on future taxable profits, allowances, economic conditions and the assumptions used to model behaviour.
UK Finance and major bank executives have warned against increasing the tax burden, arguing that internationally mobile financial activity could be affected. The TUC counters that profitable lenders can afford a larger contribution. Both positions are part of the policy debate, rather than findings established by the HMRC data.
Chancellor John Healey has confirmed that the Budget will take place on 28 October 2026. The government has not announced a decision to raise the bank surcharge as a consequence of the union’s latest calculations.
The TUC’s £6bn figure adds an estimate of the revenue forgone under an alternative tax policy. HMRC’s £39.1bn records the much broader receipts collected under current rules. They answer different questions and cannot be treated as interchangeable measures of bank taxation.
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