The banking sector has responded with criticism to the chancellor John Healey’s decision to raise the banking surcharge by three per cent.

Under the plans announced by Healey, announced in yesterday’s Budget, the Corporation Tax surcharge on banking companies will rise to six per cent from January 2027 for a period of fifteen months.

The surcharge, which is levied on bank profits above £100 million, was introduced at eight per cent in 2016, before being cut to its current rate of three per cent in 2023.

"Amid global economic storms, I am looking to our banks to help fund ​breathing space for British families," Healey told parliament on Wednesday.

Reports ahead of the Budget had suggested the government could return the surcharge to its original level to raise additional billions in tax revenue.

The Trades Union Congress has called for a rate of 16 per cent, which it says would raise £24bn over four years. The not-for-profit group Positive Money has separately suggested a 38 per cent levy on the profits of UK banks above £800 million would raise £18.9 billion in 2026 alone.

Healey’s lower-than-expected rate increase drove a jump in bank shares, with Lloyds and NatWest up approximately two per cent in the hours following the Budget and Standard Chartered up 2.4 per cent.

Tom Matterson, investment manager at wealth management firm Saltus, said that the shares rally showed banks had prepared for worse.

“Taking it all the way back to eight per cent would have sent a poor signal about one of the FTSE 100's biggest sectors at a time when the UK should be doing everything it can to attract investment rather than put it off,” he added.

Simon Kent, partner at the management consulting firm Kearney, said that the Chancellor’s decision to time-limit the increase was understandable given cost of living pressures, but that it could still impact investment decisions.

“The UK’s strength as a global financial centre rests on more than tax rates, but the cost of doing business matters,” Kent said. “An increase in the surcharge, even for 15 months, risks making the UK less attractive to internationally mobile firms when they are deciding where to locate their headquarters, listings and operations.

Senior banking leaders such as Jamie Dimon, the chief executive of JPMorgan Chase, have repeatedly warned that increasing the surcharge could negatively impact the UK financial jobs market. In May, Dimon suggested his firm could reconsider its £3 billion Canary Wharf tower investment if asked to pay more in tax.

In a statement reported by the Guardian, a JPMorgan spokesperson criticised the government for targeting banks in the budget but stopped short of pledging any change to its investment strategy.

“We are committed to the country, and we recognise the cost of living challenges there and the global economic headwinds that it faces, but to single out this industry for additional taxes again, one of the UK’s biggest generators of growth and jobs, lacks principle,” they said.

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