UK banks' record tax bill as profits soar - but analysts warn against raising taxes

A full of £44.8bn was paid to HMRC successful the fiscal twelvemonth to the extremity of March, with the UK banking assemblage generating grounds profits

UK banks paid retired a record-breaking magnitude successful taxes past year, pursuing a surge successful profits.

The spread betwixt taxation connected the City and different planetary fiscal hubs is widening, according to caller figures. This comes amid increasing speculation of imaginable taxation rises up of the forthcoming Budget statement.

The full taxation publication from the UK banking assemblage reached £44.8bn for the fiscal twelvemonth ending successful March, accoding to investigation by PwC for commercialized radical UK Finance. This fig surpasses past year's £41bn, marking the highest publication since the survey began 10 years ago.

It means that banks contributed astir 4.7% of the full magnitude the Government received successful taxes past year. Data from 41 banks, some UK-based and international, revealed their payments to HMRC implicit the latest fiscal year.

Of the full amount, £24.1bn ame from nonstop taxes, including corp tax, the slope levy, a surcharge connected banks’ profits, and leader taxes. This was higher than past year, chiefly driven by the assemblage generating much taxable profits.

Major British banks specified arsenic Lloyds and HSBC were among those to marque grounds yearly profits past year, with higher involvement rates helping them make much income from borrowers. To a lesser extent, a 1 percent constituent nett summation successful the combined corp taxation and surcharge complaint to 28% for the latest twelvemonth helped thrust up contributions.

Some £20.7bn of the full publication came from taxes collected, including schemes similar income taxation and nationalist security which banks, similar different employers, cod connected behalf of their employees. The study highlighted a increasing disparity betwixt the taxation contributions of UK banks compared to those successful different starring planetary fiscal centres.

PwC's modelling showed that the full taxation complaint for a exemplary slope operating successful London was 45.8% implicit the latest fiscal year, importantly higher than the 27.9% for a slope operating successful New York. Total taxation rates successful different apical European fiscal hubs – 28.8% successful Dublin, 38.6% successful Frankfurt, and 42.0% successful Amsterdam – were each notably little than the erstwhile year, according to PwC’s analysis.

This was chiefly owed to the suspension of contributions to the European Union’s (EU) Single Resolution Fund astatine the commencement of 2024, the study said. The EU collects fees to screen exigency backing for banks that travel into trouble, to debar taxpayers bearing the brunt of failures.

The money reached its people level of contributions by the extremity of past year, 78 cardinal euros (£65bn), meaning it stopped collecting wealth successful 2024. London’s full taxation complaint is forecast to stay higher than each different locations analysed successful 2025.

With the UK Government acceptable to denote its Budget connection adjacent week, determination has been increasing speculation implicit imaginable taxation changes to assistance screen shortfalls successful nationalist finances.

Gary Greenwood, a probe expert astatine Shore Capital Markets, warned that the Government should "think agelong and hard" astir perchance hiking taxes for banks. He argued that portion the nationalist mightiness not defy higher taxes connected banks, these institutions already look a hefty taxation load globally, and specified a determination could hinder economical growth, which the Government is keen to promote.

David Postings, main enforcement of UK Finance, echoed this sentiment, highlighting that "The wide taxation situation has an important bearing connected concern decisions and maturation and is thing that needs to beryllium considered successful presumption of our planetary competitiveness."