Britain’s largest banks have reported robust profits for the first half of 2026, reigniting calls for a windfall tax on the sector to help fund government policies aimed at reducing the cost of living. HSBC, NatWest, Barclays, and Lloyds together posted collective pre-tax profits of £29.2 billion in the six months ending June, with HSBC alone reporting a 60% year-on-year increase to $10.1 billion (£7.5 billion). Smaller competitors like Metro Bank have also reported strong earnings, with a 38% rise in pre-tax profits to £60.7 million.

The banks attribute their financial gains to higher interest rates, increased fees from wealth management and insurance services, and broader market volatility. HSBC’s chief executive, Georges Elhedery, indicated plans to restart share buy-back programs paused since last year and suggested bonuses for bankers might increase due to the favorable results. The lenders emphasize their role in supporting economic growth, with executives warning that additional taxes could constrain lending and investment.

Campaign groups, including Positive Money and the Trades Union Congress (TUC), argue that the banks can afford to contribute more toward public finances. They point out that nearly half of the banks’ profits—£13.7 billion—have been committed to shareholders via dividends and share repurchases. Positive Money estimates that a windfall tax modeled on Spain’s 38% levy on revenues over £800 million could generate around £19 billion, funds they suggest could support Prime Minister Andy Burnham’s cost of living initiatives. These measures include a VAT cut on electricity bills, a £2 bus fare cap, and business rate reductions for pubs and music venues.

TUC General Secretary Paul Nowak has called on the government to act, saying the banks’ profits come as many households face rising bills, partly due to the ongoing war in Iran driving up energy prices. Positive Money’s co-director Sara Hall urged Burnham to break with previous administrations and implement a windfall tax that could provide substantial relief to struggling families and businesses.

The government has yet to confirm any specific plans for a bank tax. Burnham has acknowledged the need to address rising costs but emphasized caution in managing public finances.

The banking sector’s response reflects concern about the impact of further taxation on their ability to lend and support the economy. NatWest’s CEO Paul Thwaite warned that tax increases could slow lending and harm economic stability. Barclays’ CFO Anna Cross similarly highlighted banks’ importance to Burnham’s growth agenda, indicating that financial constraints might reduce available credit.

Historically, attempts to impose special levies on banks have been contentious. The bank levy introduced after the 2008 financial crisis was scaled back following industry pushback, with subsequent reductions in rates. More recently, Chancellor Rishi Sunak lowered the bank profits charge from 8% to 3% in 2023 amid concerns about Brexit’s effects on London’s financial competitiveness.

As government officials consider the banks’ profitability, campaigners suggest alternative approaches, such as taxing the interest commercial banks earn from reserves held at the Bank of England, which some say results in significant public revenue losses. The UK Finance lobby group maintains that banks pay a relatively high overall tax rate, including employment taxes and VAT, compared with other financial centers, but the debate over windfall taxes remains unresolved.

With the new prime minister’s cost of living agenda underway and the pressures from both campaigners and the City intensifying, the coming months are likely to see renewed negotiations over how best to balance economic growth with calls for greater contributions from the banking sector.