UK govt unlikely to impose windfall tax on banks - report

Bank stocks rallied on Monday following a report the government had denied suggestions it is considering a windfall tax on the sector as one means of closing the budget hole.

The Times cited two senior sources close to Prime Minister Rishi Sunak and Chancellor Jeremey Hunt as saying that they had played down the notion they were looking at new taxes on banks.

The discussions between Sunak and Hunt were thought to be focused on the 8% surcharge that banks pay on top of corporation tax. When Sunak was chancellor, he said he would cut this to 3% alongside his plans to raise corporation tax to 25% from 19%. This would give an overall rate of 28%.

As Hunt has not said in public whether he intends to press on with the cut to the bank surcharge, lenders have been warning that they could face a total corporation tax levy of 33%.

While this is currently the topic of discussion before the budget on 17 November, The Times said government sources expect Hunt to cut the surcharge to 3% as planned, leaving banks with a 28% rate. Although this would still amount to a small overall rise, it would be much lower than feared.

UK Finance, the industry’s lobby group, warned last week that London’s banks already pay more tax than those in New York and Dublin.

At 0835 GMT, NatWest shares were up 3.8% at 233.50p, Lloyds was trading up 1.9% at 42.05p and Barclays was 0.9% higher at 147.68p. HSBC was 1% firmer at 446.80p.