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Shares across major UK banks climbed on Tuesday as confidence grew that the sector may escape further tax increases in Chancellor Rachel Reeves’ upcoming budget.
NatWest, Lloyds and Barclays saw notable gains — rising 3.7%, 3.8% and 2.3% respectively — following reports that the Treasury had privately requested supportive comments from banks ahead of the budget announcement, fuelling speculation that no additional levy will be imposed on lenders.
Market analysts say the expectation of a tax reprieve helped strengthen the FTSE 100. Dan Coatsworth of AJ Bell noted that lobbying from financial institutions appears to have influenced the decision, though many bank leaders remain cautious until the budget is confirmed.
Debate surrounding a potential tax hike has intensified in recent months, especially after the IPPR thinktank argued that banks should face additional charges to recover profits gained through quantitative easing policies implemented after the 2008 financial crisis. However, banks have long insisted that they already pay a high combined tax rate of 45.8% — significantly more than international counterparts in Frankfurt and New York.
Industry leaders have warned that a heavier tax burden could restrict lending and undermine the government’s Leeds reforms, which were introduced to boost growth by reducing regulatory pressure on the financial sector.
Concerns resurfaced earlier this month when Labour scrapped plans to increase general income tax, prompting fears among some banks that a targeted sector tax could return. But fresh reporting from the Financial Times suggests the government may be preparing instead to offer reassurance rather than penalties.
Despite improving market sentiment, calls for increased taxation persist. Campaign group Positive Money, alongside Labour MPs, is pushing for a windfall tax on bank profits and has collected nearly 69,000 signatures in support. Supporters argue that applying a 38% charge — similar to energy sector taxation — could generate more than £14bn for public priorities such as healthcare, education and community services.
Labour MP Simon Opher emphasised that the upcoming budget presents a chance to revive struggling public services. He urged policymakers to consider the petition, stressing the importance of a fairer economic approach.
