Bank tax receipts rise 20% to £1.2bn after profits surge

By the Editorial Team · Friday, September 25, 2026

The UK government saw a 20% rise in bank surcharge receipts to £1.2 billion and a 9% increase in the bank levy to £1.4 billion during the 2025-26 tax year, driven by higher banking profits amid elevated interest rates. This surge is fueling debates over a potential new windfall tax on banks in the upcoming Budget, with industry leaders warning it could reduce domestic investment despite the sector’s significant economic role.

The UK government recorded a 20 percent increase in bank surcharge receipts during the 2025-26 tax year, reaching £1.2 billion, following a notable rise in banking sector profits. Concurrently, the bank levy collected from financial institutions grew by 9 percent to £1.4 billion, according to figures released by HM Revenue & Customs.

Since the 2010s, UK banks have been subject to a levy on their balance sheets alongside a surcharge on profits, in addition to standard corporate taxes. HMRC attributed the higher tax receipts primarily to increased profitability within the UK banking sector.

Leading banks including Barclays, HSBC, Lloyds Banking Group, and NatWest have collectively generated over £200 billion in pre-tax profits over the last five years. This earnings surge is largely linked to elevated interest rates, with banking sector share prices climbing to their highest levels since the global financial crisis of 2008-09.

These developments come amid growing government discussions about a potential windfall tax on the banking industry in the forthcoming Budget. Senior bank officials have cautioned that additional taxes could prompt a reduction in domestic investment, emphasizing that the sector already plays a significant role in the UK economy.

While the banking sector avoided such a levy in last year’s Budget, opposition figures, including former deputy prime minister Angela Rayner, have advocated for increased taxation on banks. Rayner proposed raising the bank surcharge to 5 percent to generate an estimated £1.5 billion annually, a measure aimed at addressing fiscal challenges exacerbated by geopolitical tensions, such as the conflict in Iran.

The bank surcharge, introduced at a rate of 8 percent in 2016, was reduced to 3 percent in 2023. The bank levy, established in 2011 following the global financial crisis, currently applies two rates of 0.1 percent and 0.05 percent on short- and long-term liabilities, respectively.

As the government prepares the upcoming Budget, the banking sector continues to navigate competing pressures between contributing to public finances and maintaining investment incentives within the UK.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.