Andy Burnham Bank Tax: Could Higher Levies Drive Banks Out of Britain?

JPMorgan chief Jamie Dimon has warned Chancellor John Healey against raising taxes on banks ahead of the 28 October Budget, while former NatWest chairman Sir Howard Davies has said lenders are nearing a “tipping point”. But there is an important distinction: Andy Burnham’s Government has not announced a specific new bank tax. Higher levies remain a possibility rather than confirmed policy.

→ Current position: The Treasury has declined to rule out changes to bank taxation, but no rate, structure or implementation date has been announced.

→ Why businesses should care: A sufficiently large tax increase could influence bank lending, investment and employment decisions, although claims that banks would leave Britain remain warnings rather than established outcomes.

What Is Andy Burnham’s Bank Tax Position?

Prime Minister Andy Burnham has not announced a standalone windfall tax on UK banks. The debate has instead grown from pressure on his Government to find revenue for its cost-of-living programme and other spending priorities.

Campaigners and trade unions have urged ministers to target strong bank profits, while the Treasury has said tax decisions will be announced at fiscal events rather than commenting on individual proposals. That leaves higher bank taxation on the table without making it Government policy.

The debate fits into Burnham’s broader package of cost-of-living measures, which has already included measures affecting energy, transport and consumer markets.

For businesses, that distinction between speculation and policy is crucial. Planning around a proposed tax before its design is known could lead to decisions based on assumptions rather than legislation.

Why Are Higher Bank Taxes Being Discussed?

The immediate reason is profitability.

HSBC, Barclays, Lloyds and NatWest collectively reported £29.2 billion of profit in the first half of 2026, according to recent reporting, with £13.7 billion allocated to dividends and share buybacks. That has strengthened arguments that banks can make a larger contribution while households and companies continue facing high borrowing and living costs.

There are several proposals in circulation rather than one agreed Burnham bank tax.

The TUC has estimated that restoring the Bank Corporation Tax Surcharge from 3% to its previous 8% rate could raise around £9 billion over four years. Positive Money has promoted a different windfall-tax approach that it estimates could raise about £19 billion.

Those figures are campaign estimates, not Treasury forecasts. The amount eventually raised would depend on the tax base, rate, duration and how banks responded.

How Are UK Banks Taxed Now?

Banks already face additional taxation beyond the normal corporation tax system.

Bank Corporation Tax Surcharge

The main Corporation Tax rate is 25%. Banking companies can also face a 3% Bank Corporation Tax Surcharge on qualifying profits above a £100 million allowance for a banking group. The surcharge was reduced from 8% to 3% from April 2023. The detailed Bank Surcharge rules are set out by HMRC.

The Bank Levy

Banks can additionally pay the Bank Levy, which applies to specified equity and liabilities on UK balance sheets. Since 2021, its scope has broadly focused on UK balance sheets rather than overseas activities of UK-headquartered banking groups.

How Much Tax Does Banking Generate?

The latest complete HMRC banking tax statistics show £35.2 billion of PAYE, Corporation Tax, Bank Levy and Bank Surcharge receipts from the sector in 2024/25.

That included:

• £24.1 billion in PAYE and National Insurance receipts
• £8.8 billion in Corporation Tax
• £1.3 billion from the Bank Levy
• £1.0 billion from the Bank Surcharge

The £35.2 billion figure should not be interpreted as tax paid directly from bank profits alone because it includes PAYE and National Insurance associated with employees. HMRC also notes that some taxes, including irrecoverable VAT, are not included in that headline total.

Could Higher Taxes Drive Banks Out of Britain?

This is where the debate becomes less certain.

The supplied Telegraph report says Sir Howard Davies, the former NatWest chairman, believes many lenders are approaching a “tipping point” at which higher taxes could encourage an exodus from the Square Mile.

Jamie Dimon has issued a similar warning. The JPMorgan chief has argued that uncompetitive taxes can push capital and jobs to other countries and suggested tax policy could influence the bank’s planned £3 billion Canary Wharf headquarters. JPMorgan employs about 23,000 people in the UK, with the proposed building intended to house more than half of them.

That does not mean major lenders would automatically abandon Britain after a tax rise.

A more realistic risk is that international banking groups could alter marginal investment decisions: where the next office is built, which teams expand, where new jobs are located or how much capital is committed to UK operations.

That is different from closing a UK bank altogether.

The wider high-earner tax warning also illustrates why behavioural responses matter when assessing tax changes, although that IMF analysis concerns labour taxation rather than banking.

Why Do Supporters Say Banks Can Afford More Tax?

Supporters focus on the recent rise in profitability.

Higher interest rates have helped some lenders earn more from the difference between what they charge borrowers and what they pay depositors, while major banks have also announced substantial shareholder distributions.

Campaigners therefore argue that additional taxation could capture part of an unusually profitable period without materially weakening lending.

The banking industry disputes that conclusion. Its argument is that banks compete internationally for investment and that repeatedly imposing sector-specific taxes makes Britain less attractive relative to financial centres such as New York, Dublin or Frankfurt.

Neither conclusion is automatic. The outcome would depend heavily on how large, permanent and targeted any tax was.

What Could a Bank Tax Mean for Small Businesses?

For SMEs, the most important question is not whether a bank pays several percentage points more tax. It is whether that additional cost changes lending decisions.

Business Loan Costs

Banks could attempt to protect profitability by adjusting loan pricing, fees or the returns required from lending.

However, a tax rise does not mean business loan rates would increase by an equivalent amount. Loan pricing is also affected by Bank Rate, funding costs, competition, borrower risk and wider credit conditions.

Bank of England data for March 2026 showed annual SME borrowing growth at 3.7%, while the effective rate on new SME loans was 6.11%. That demonstrates the continuing importance of bank credit to smaller firms, but it does not establish that a bank tax would automatically increase rates.

Access to Business Finance

The more significant SME risk could be credit availability.

If banks respond to lower expected returns by becoming more selective, companies with weaker balance sheets or limited trading histories could find borrowing harder to secure.

Established companies with strong cash flow may experience much less change.

Jobs and Investment

Reduced City investment could also have indirect consequences.

Banks purchase professional, technology, property, consultancy and support services from thousands of other businesses. Fewer expansion projects or financial-sector jobs could therefore affect suppliers beyond the banks themselves.

Would Banks Really Leave the UK?

Britain still has substantial advantages as an international financial centre: deep capital markets, skilled labour, legal infrastructure, established financial institutions and access to a large concentration of professional services.

Those advantages mean tax is only one factor in a location decision.

But international banks also have alternatives. A global institution deciding whether its next 1,000 jobs should be in London, Dublin, Paris or New York can compare tax, regulation, talent, property costs and access to markets.

The central risk is therefore gradual displacement rather than an overnight banking exodus.

The larger and less predictable a new tax becomes, the stronger that risk could become. A limited temporary charge would present a different investment calculation from a permanent and substantial increase in the sector’s effective tax burden.

What Happens Next?

The key date is 28 October 2026, when Chancellor John Healey is due to deliver the Budget. The Government has officially confirmed that date.

Until then, businesses should watch for four details:

1. Whether the Government actually announces a banking tax change.
2. Whether it changes the existing surcharge or creates a new windfall tax.
3. Which banks, profits or activities would fall within its scope.
4. Whether the measure is temporary or permanent.

Readers following Burnham’s wider tax agenda may also want to monitor the separate Burnham inheritance tax proposal, where important details likewise remain unconfirmed.

What Should Small Businesses Do Now?

There is no reason for SMEs to change borrowing arrangements solely because of speculation about a bank windfall tax.

Businesses with significant borrowing exposure can instead review their existing facilities, understand when fixed rates expire, compare alternative lenders and maintain up-to-date financial information that makes refinancing easier.

Companies planning major investment should also stress-test projects against different borrowing-cost scenarios rather than assuming either that credit will become substantially more expensive or that nothing will change.

The practical trigger for action should be a confirmed Budget measure, not political speculation.

Conclusion

The Andy Burnham bank tax impact could eventually extend beyond the banking sector if higher taxation changes the way lenders price credit, allocate capital or choose where to invest.

Warnings that banks could be driven out of Britain should nevertheless be treated as warnings, not forecasts. Sir Howard Davies and Jamie Dimon have raised serious competitiveness concerns, but no major lender has announced an exodus because of a tax that has not yet been introduced.

Supporters point to £29.2 billion of first-half profits among the four largest banks and argue that the sector can afford a larger contribution. Banks counter that Britain already imposes sector-specific taxes and risks losing investment if the burden rises further.

For small businesses, the question to watch is ultimately simpler: does the final policy make banks less willing or more expensive to lend?

The answer will depend on what, if anything, John Healey announces on 28 October 2026.

FAQs

Has Andy Burnham announced a new bank tax?

No. Burnham’s Government has not announced a specific new bank tax, rate or implementation date. The Treasury has declined to rule out changes, meaning the issue remains under consideration ahead of the Budget.

What taxes do UK banks already pay?

Banks pay Corporation Tax and can face an additional 3% Bank Corporation Tax Surcharge on qualifying profits above the relevant allowance. The sector also faces the separate Bank Levy on specified balance-sheet liabilities.

Could a bank tax increase business loan rates?

Possibly, but not automatically. Banks could respond to higher taxation through pricing, cost reductions, investment changes or lower shareholder returns. Business loan rates are also determined by interest rates, funding costs, competition and borrower risk.

Could banks actually leave Britain over higher taxes?

A complete withdrawal by major banks is possible in theory but is not the only risk. Banks could instead shift individual teams, jobs, investment projects or capital to other financial centres. No major UK banking exodus caused by the proposed tax has been confirmed.

When could a new UK bank tax be announced?

The next key fiscal event is Chancellor John Healey’s Budget on 28 October 2026. Whether it will contain a higher Bank Surcharge, windfall tax or another banking measure has not been confirmed.