US EditionBritish bank shares slide on fears of new tax
IPPR recommends a temporary 2.5% levy on major UK banks to recover £22 billion annual losses from the Bank of England's quantitative easing and fund public services.
- A prominent UK think tank proposed on August 29, 2025, implementing a new windfall tax on major British banks to recover losses incurred by the Bank of England's quantitative easing program.
- The tax proposal stems from the Bank of England facing record losses costing taxpayers £22 billion yearly since 2021 as interest rates rose, and from commercial banks' rising profits benefiting from this setup.
- IPPR proposes imposing a narrowly focused tax on the extraordinary profits of major banks such as Barclays, Lloyds, HSBC, and NatWest, drawing on a strategy similar to the deposit tax introduced by Margaret Thatcher in the early 1980s, while excluding smaller lenders with assets under £25 billion.
- The IPPR suggests that imposing a temporary levy on bank profits could generate as much as £8 billion annually to fund public services, with the tax ending once QE-related gilts are removed from the Bank of England’s balance sheet or the base interest rate reaches 2%; however, some economists caution this may lead to unintended consequences.
- UK Finance opposes the proposed tax, warning it could undermine the UK's financial sector competitiveness, while the Treasury stresses that focusing on economic growth remains the key strategy for improving public finances amid ongoing cost-of-living challenges.
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Shares in the biggest UK banks fell sharply today due to fears of a potential tax raid on the sector to help shore up the UK’s public finances. The market was reacting to mounting fears that the Government will target the banking sector at the autumn Budget with a surcharge on profits or even a
Windfall tax on bank profits could raise £8bn a year, report says
Chancellor Rachel Reeves has been told that a tax on bank profits could raise up to £8 billion a year for public services. The Institute for Public Policy Research says that the move would give the chancellor much needed fiscal headroom, should a levy on the windfalls from major firms such as Barclays, Lloyds, HSBC and NatWest be imposed. The Independent reports: “The think tank argues the UK is an international outlier in having its Treasury pa…
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