Customers could pay cost of surcharge on bank profits

By the Editorial Team · Thursday, October 29, 2026

The UK government will double the corporation tax surcharge on banks from 3% to 6% for 15 months starting in January to raise approximately £1.475 billion for household financial support. Experts warn this increase could lead banks to raise borrowing costs and reduce savings rates, potentially burdening consumers and businesses despite the government’s intent to ease economic pressures.

The UK government has announced a temporary increase in the corporation tax surcharge on banks, raising concerns that the higher levy could ultimately affect consumers. Starting in January, the surcharge will double from 3 percent to 6 percent for a period of 15 months, with the aim of generating an estimated £1.475 billion by the end of the 2028-29 tax year. The additional revenue is intended to help fund measures providing financial support to households.

Chancellor John Healey outlined the surcharge increase as part of broader fiscal efforts to ease pressures on families amid ongoing economic challenges. However, experts warn that while the tax targets bank profits, its impact may extend beyond institutional balance sheets, potentially influencing the cost of borrowing and savings products available to individuals and small enterprises.

Anthony Whatling, a tax adviser at Alvarez & Marsal, explained that banks may respond to reduced profit margins by adjusting their offerings. “Doubling the surcharge will reduce profits available to shareholders,” he said, “and could mean that banks seek to protect their margins by offering less competitive savings rates or charging more on new mortgages.” This, he noted, may create downstream effects for tenants, as landlords facing higher mortgage costs and increased taxes on rental income might raise rents. Healey also confirmed the rates for property income tax, which are set at 24 percent for basic rate taxpayers, 44 percent for higher rate, and 49 percent for additional rate payers.

Lucy Mangan, a partner at the accountancy firm Menzies LLP, echoed similar concerns. She warned that the increased surcharge on banks could translate into higher borrowing costs, which might undermine government efforts to support businesses. “Higher surcharges on banks risk being passed on in pricier credit,” Mangan said, “blunting the benefit of an extra £5 billion for the British Business Bank for the firms it is meant to reach.”

The government’s plan reflects a balancing act between raising revenues from the financial sector and protecting consumers and businesses from additional financial strain. As the surcharge comes into effect, observers will be closely monitoring how banks adjust their pricing strategies and the subsequent impact on households and the wider economy.

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.