UK budget targets bank profits

The British government plans to raise the additional tax rate on bank profits from 3% to 8 as part of the October 28 budget, which could lead to the tax burden on the banking sector in London exceeding 50% for the first time. It is estimated that this increase will generate an extra £2.2 billion in revenue for the government during the 2031-2032 fiscal year, but experts warned that it could reduce bank profits and impact lending and economic growth. There are divisions within the banking sector regarding how to respond to the announcement, with some banks supporting the adjustment of rules separating banking activities from investment services, while others have proposed temporarily easing tax obligations by utilizing deferred tax assets, though this could increase the tax burden on British banks only. The current weak profits of banks diminish their ability to withstand the new taxes, amid concerns that investment and London's financial attractiveness could suffer, with shares of some major banks declining as a result of these expectations. The International Monetary Fund suggested alternatives to increasing taxes, such as updating the property tax system and expanding the VAT base, while the British Trade Union Congress called for raising taxes on banks by up to £15 billion annually.

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