THE Chancellor is set to launch a £20billion raid on banks in this month’s Budget – and it could impact your savings and mortgage.
Under the plans the government could hike the surcharge on their profits above £100million from 3% to 8% in a bid to help plug a gaping hole in the public finances.
This would affect the UK’s big four banks – HSBC, Barclays, NatWest Group and Lloyds Banking Group – which made a pre-tax profit of £29billion in the first six months of 2026.
Here we explain what it could mean for your money.
How would it work?
Major banks pay a Corporation Tax surcharge, which is a charge on the profits they make, and is in addition to the Corporation Tax they pay.
Until 2023 banks paid this surcharge at 8% but it was cut to 3% by former Chancellor Jeremy Hunt.
At the same time he increased the UK’s main rate of Corporation Tax from 19% to 25%.
Reversing the surcharge cut could raise up to £2billion for the Treasury, although banks have warned that it could cost the economy £20billion over the next decade.
Banks have made more profit in the past five years due to interest rate rises.
In 2021 interest rates were at just 0.1%, while today they are at 3.75%.
Banks have been able to make more money as higher interest rates mean they’ve upped mortgage rates while still keeping savings rates down.
High street banks including HSBC, Barclays, Lloyds and NatWest were criticised by MPs and consumer groups in 2023 for not passing on interest rate rises to savers.
Paul Nowak, the general secretary of the Trades Union Congress, said earlier this week: “Britain’s big four banks are making a billion pounds a week, while bonuses have hit a post-crash record.
“These are bumper profits, driven by high interest rates and households’ mortgage misery.
“It’s time to make sure banks pay their fair share.”
Another option the Chancellor could announce is a bank levy, which is a tax on the money a bank owes to its customers or other banks.
How would it affect me?
If banks have to pay more money in tax it could eat into their profits.
They may decide to take action to recoup some of these losses, for example by passing on additional costs to customers at a time when they’re already feeling the pinch.
Analysts at investment bank UBS have warned that a tax on banks could result in higher costs for customers.
Banks may decide to push up the cost of their mortgages, lower their savings rates or hike fees and charges in order to balance the books.
This could undermine Andy Burnham’s pledge to give households more “breathing room” in the Budget.
It is unlikely that the big four would decide to substantially hike the cost of their mortgages or cut their savings rates back as it could make them look less attractive to savers.
As a result, they may lose customers to banks offering better rates.
But the tax would only affect the biggest banks in the UK, so savers could still get competitive rates at smaller banks.
It’s always important to shop around to make sure you’re getting the best deal.
Use a comparison website such as MoneyfactsCompare or Compare the Market to check the rates on offer.