Reports of an 8% bank surcharge take about 2% off Lloyds and NatWest
Lloyds and NatWest fell about 2% on Friday after reports that Chancellor John Healey may restore the bank profit surcharge to 8% from 3%. The TUC puts the yield at £2.25bn a year, but the Treasury has not confirmed the option ahead of the October 28 Budget.
The Board Room · Leadership desk
Key figures: the TUC says the tax rise on banks' profits would raise £2.25bn a year. The IPPR estimates the Chancellor's fiscal buffer has dropped by up to £15bn since the spring. The TUC's 16% surcharge would raise about £6bn a year.
| Figure | Value | Note | Claim |
|---|---|---|---|
| TUC estimate, tax rise on bank profits | £2.25bn a year | 7 | |
| Fiscal buffer drop since spring, up to | £15bn | IPPR estimate | 14 |
| TUC's 16% ask, about | £6bn a year | 21 |
What happened
- The option traces to a Guardian report that the Chancellor is weighing a reversal of the cut made under former Conservative chancellor Jeremy Hunt.
- Shortly after 8:30am Lloyds was down 1.9% at 103.85p and NatWest down 1.8% at 662.2p, according to Proactiveinvestors NA.
- The IPPR, a think tank, this week recommended £1bn from a temporary windfall surcharge on banks within a package meant to raise an extra £16bn.
- UK Finance, the banks' trade body, said a rise in bank taxes at the Budget "would weaken the UK's competitiveness, discourage investment and job creation".
Why it matters
- Who has to decide decision Finance teams have to choose a planning rate for a charge that is reported but not announced, with the Budget 12 days after the share fall.
- What it limits constraint At the IPPR's upper estimate of a £15bn loss in the Chancellor's fiscal buffer, £2.25bn recovers 15% of it, so a bank surcharge alone would not rebuild the buffer.
- What it sets up precedent The TUC's 16% ask works out at £6bn a year, about 2.7 times its figure for 8%. That higher reference point makes a reversion to 8% look moderate.
A 2% move on a newspaper report [2] says little about the odds that the Chancellor acts. The fall was confined to lenders: Barclays slipped as well [1], while the FTSE 100 was down only 0.1% shortly after 8:30 [4].
Scale is the harder question. Proactiveinvestors NA says a reversal could raise more than £2bn a year [8], and the TUC says £2.25bn [7]. Proactiveinvestors NA also gives a figure it credits to the Guardian: around £200bn of pre-tax profit over five years for HSBC, NatWest, Barclays and Lloyds [23]. That is about £40bn a year [25], and £2.25bn is about 5.6% of it [18]. The comparison is rough, because banks pay the surcharge on qualifying profits on top of corporation tax [5]. The sources do not give the yield by lender, the period behind the TUC's profit figure, or a start date for any change.
TUC general secretary Paul Nowak said: "Britain's big four banks are making a billion pounds a week, while bonuses have hit a post-crash record." [24] The five-year total implies about £770m a week [26].
The sector's defenders make a competitiveness case. Louise Hellem, the CBI's chief economist, said the Budget should avoid further sector-specific taxation, including "on a banking sector already facing a higher tax rate than competing international financial centres" [11]. The Chancellor's case is about revenue. He is looking for ways to raise money and hold the deficit down as government borrowing costs soar [12], and those costs have risen on inflation fears tied to the US war with Iran [15].
The trade-off is revenue against the investment and competitiveness that UK Finance and the CBI say is at stake [10][11]. For a finance team, this quarter's decision is a planning case, and next quarter's consequence is whichever rate the Budget sets. We think a case at 8% is the sensible base, because it is the only rate reported as under consideration [2]. If the Budget adopts a temporary charge of the kind the IPPR proposed [9], an open-ended 8% case would overstate the later years.
What to watch
- Whether the Chancellor confirms or drops the surcharge option before or in the October 28 Budget statement.
- Whether the Budget names a rate, a start date and whether the charge is temporary or open-ended.
- Whether Lloyds and NatWest recover the 2% once the Budget text is out.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence45
- Adoption
- Not scored
- Hype gap+25
- Incentives70
- Confidence58
Perspective Coverage
3 publishers- Builder
- Builder 3%
- Operator
- Operator 35%
- Investor
- Investor 62%
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
Lloyds Banking Group and NatWest led falls on the FTSE 100 on Friday, both down 2% in morning trading, with Barclays shares also slipping after reports that John Healey is eyeing a raid on lenders.
- [2]
One option the Chancellor is considering is reversing former Tory chancellor Jeremy Hunt's reduction in the bank profit surcharge from 8% to 3%, according to a report in the Guardian.
- [3]
Shortly after 8:30 on Friday Lloyds fell 1.9% to 103.85p and NatWest dropped 1.8% to 662.2p.
- [4]
The FTSE 100 was down 0.1% at 10,826.31 shortly after 8:30am.
- [5]
Banks already pay the surcharge on qualifying profits in addition to corporation tax.
- [6]
The Proactiveinvestors NA report on the share move is dated 16 October 2026 and refers to Friday trading.
- [7]
TUC general secretary Paul Nowak backed the move, saying the tax rise on banks' profits would raise £2.25 billion a year.
- [8]
Reversing the previous cut in the bank surcharge, taking the rate back to 8% from 3%, could raise more than £2 billion a year.
- [9]
The Institute for Public Policy Research this week recommended generating £1 billion from a temporary surcharge on commercial banks' windfall profits, within a package of measures to raise an extra £16 billion.
- [10]
A UK Finance spokesperson said an increase in bank taxes at the Budget "would weaken the UK's competitiveness, discourage investment and job creation".
- [11]
Louise Hellem, chief economist at the CBI, said the Budget should avoid further sector-specific taxation, including "on a banking sector already facing a higher tax rate than competing international financial centres".
- [12]
The Chancellor is seeking ways to raise revenue and keep the UK's budget deficit under control in the face of soaring Government borrowing costs.
- [13]
The Budget is on October 28, and Mr Healey has warned the public to be prepared for a tough Budget.
- [14]
The IPPR estimated that the Chancellor's fiscal buffer has dropped by up to £15 billion since the spring.
- [15]
Government borrowing costs have soared due to fears over inflation driven by the US's war with Iran.
- [16]
A Treasury spokesperson said decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.
- [17]
The TUC called for a bigger surcharge increase, to 16%, saying that could raise £24 billion in tax revenues over four years.
- [18]
The TUC's £2.25bn a year is about 5.6% of the four largest lenders' average annual pre-tax profit.
- [19]
The Budget falls 12 days after Friday 16 October.
- [20]
At the IPPR's upper estimate of a £15bn loss in the fiscal buffer, £2.25bn is 15% of it.
- [21]
The TUC's 16% surcharge would raise about £6bn a year.
- [22]
The TUC's 16% option at £6bn a year is about 2.7 times its £2.25bn figure for the 8% option.
- [23]
Britain's largest lenders, including HSBC, NatWest, Barclays and Lloyds, have generated around £200 billion in pre-tax profits over the past five years as higher interest rates boosted earnings.
- [24]
Paul Nowak, TUC general secretary, said: "Britain's big four banks are making a billion pounds a week, while bonuses have hit a post-crash record."
- [25]
The four largest lenders' pre-tax profit averaged about £40bn a year over five years.
- [26]
A £40bn annual profit implies about £770m a week.
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Sources
2 independent publishers whose own reporting we read for this story.
- independent.co.ukBank shares drop on reports Chancellor planning Budget tax raid | The Independent
1 article · October 16, 2026
- Bank shares drop on reports Chancellor planning Budget tax raid
lbc.co.uk
1 article · October 16, 2026
- proactiveinvestors.comLloyds and NatWest lead FTSE 100 fallers as bank tax fears return
1 article · October 16, 2026
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- FTSE 100Follow
- Barclays PlcFollow
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