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Bank profits tax: would borrowers and savers end up paying?

ended 04. October 2026

HMRC received £39.1bn from the banking sector in PAYE, Corporation Tax, Bank Levy and Bank Surcharge in 2025 to 2026, up 8.5%, its official statistics published on 1 October 2026 show. Press reports in late August said a windfall tax on bank profits was being considered for the Budget on 28 October. Nothing has been announced.

The catch is what that £39.1bn is made of. More than two thirds, £26.8bn, is PAYE: Income Tax and National Insurance collected through bank payrolls, including the banks' own employer contributions, up 9.8% partly on the April 2025 employer National Insurance changes. The taxes on bank profits, Corporation Tax and the Bank Surcharge, raised about £10.9bn. The Levy and the Surcharge, the two taxes only banks and building societies pay, raised about £2.6bn. The headline is mostly a payroll story.

So if profits are taxed harder, who carries it is not in these statistics: shareholders, including pension funds and ISAs holding bank shares, and borrowers and savers, if lenders reprice mortgages or deposit rates. Business owners with a bank loan stand in the same line.

  1. If the Budget raises tax on bank profits, would lenders absorb it, or pass it on through dearer mortgages and thinner savings rates?
  2. Who would feel it first: the homeowner remortgaging next year, the saver on an easy-access account or the pension saver holding bank shares, and is that fair?
  3. Have any clients delayed a remortgage, moved savings or asked whether a bank tax will reach them because of the Budget speculation? If so, please give as much colour and detail as possible.

3 responses from the Newspage community

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Nouran MoustafaVerified
Practice Principal & IFA at Roxton Wealth
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A tax on bank profits does not stay neatly inside the bank.

The £39.1bn headline is also misleading if read as “tax on bank profits”: £26.8bn of it was PAYE and National Insurance collected through bank payrolls. Actual Corporation Tax and Bank Surcharge receipts were around £10.9bn.

If profit taxes rise, banks have several levers: accept lower returns, reduce lending appetite, reprice mortgages and business loans, or compete less aggressively for deposits. Which lever gets pulled depends on competition and funding conditions.

Borrowers could therefore feel it through slightly higher rates or tighter criteria, while savers could see thinner deposit pricing. Shareholders, including pension funds, may also absorb some of the hit.

The dangerous assumption is that “taxing banks” means only banks pay.

Financial costs have a habit of travelling.
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Tony RedondoVerified
Founder at Cosmos Currency Exchange
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As with non-doms and HNWs, capital has never been easier to move, at the press of a button, across the globe. Push too hard on tax, land on the wrong side of the Laffer curve, and capital flees to friendlier shores. Britain loses out. Of HMRC's £39.1bn from banking in 2025/26, £26.8bn was PAYE and employer NIC; Corporation Tax, the Bank Surcharge and the Bank Levy added £13.5bn. Hit bank profits on 28 October and lenders won't just absorb it. At best, they protect margins by repricing with wider spreads, tighter lending, thinner savings rates. At worst, JP Morgan shelves its two multi-billion-pound London developments and others write the UK off as uninvestable. Financial services employs 1.1 million people (3% of the workforce) while generating roughly 3.5% of tax receipts. London produces over half the sector's revenue and tax base, but two in three workers sit outside the capital, vital for regional jobs and retail banking.
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Scott GallacherVerified
Director at Rowley Turton
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It is politically appealing to suggest that banks are making too much money and can simply afford to pay more tax. But ultimately taxes on banks are borne by people — through lower shareholder returns, lower pay, lower savings rates or higher borrowing costs.

A genuine windfall tax can make sense as a one-off response to exceptional profits. But you cannot keep having “windfall taxes”. If governments repeatedly target the same sector, it simply becomes another permanent cost of doing business.

Banks may absorb some of that cost, although that would, of course, hit shareholders, including pension funds. But customers are unlikely to be untouched. Savers could receive lower rates, while borrowers could face higher mortgage and loan rates. Pension and ISA investors may also suffer through lower returns.

The seductive idea is that somebody else will pay. Economics is rarely that simple.