The chancellor indicated on Thursday he would scrap or reduce the bank surcharge to ensure banks do not pay much more when corporation tax rises.
Rishi Sunak announced at his February budget that corporation tax would rise to 25% from 19% by 2023 for companies with at least £250,000 of annual profit. At the time, he said he would review the 8% bank surcharge, introduced after the financial crisis, to make sure UK banks were not made uncompetitive.
In a speech to City bosses at the Mansion House, Sunak said: “I announced at budget that we’d review the bank surcharge. Our ongoing conversations have only reinforced my view that the combined tax rate on UK banking profits should not increase significantly from its current level.”
Sunak said he would complete the review of the surcharge by the end of 2021 as planned.
UK bank stocks rose, led by Barclays whose shares gained 2.5% to 175.32p at 12:56 BST. NatWest rose 1.2%, Lloyds and HSBC each gained 1.4% and Virgin Money was up 1.8%. Metro Bank rose 2.3%.
Sunak’s speech followed an earlier address by Bank of England Governor Andrew Bailey in which reaffirmed the BoE’s belief that inflationary pressures would be temporary and that it would not tighten policy in response to short-term trends.
