As the UK seeks to plug its funding gap, there are growing concerns in London regarding higher taxes being imposed upon banks.
Banks are concerned by Chancellor Jeremy Hunt’s claim that “nothing is off the table” when it comes to windfall taxes. Two people speaking on behalf of the private sector asked for clarification from the Treasury about the plans for the industry but they didn’t get any.
Hunt said that he would increase corporation tax to 25% starting in April. This is in contrast to Kwasi Kwarteng’s plan to freeze it at 19%. The bank profits are subject to an 8% surcharge. Lenders will now be subject to 33% tax, instead of 27% unless Hunt lowers the surcharge.
PwC’s analysis of UK Finance found that UK banks could pay a higher rate than those in London due to other employment taxes.
At Wednesday’s open, shares in Lloyds Banking Group plc and NatWest Group plc fell.
According to the Treasury, it will provide more information on bank tax at its fiscal event scheduled for October 31. A Treasury spokesperson said that it would not comment on speculation and that the PM and Chancellor have made clear that they will need to make difficult decisions to restore economic stability.
According to The Financial Times, Hunt was reported by the Financial Times earlier as considering raising taxes on energy companies and lenders. This is in addition to citing allies of his new Chancellor.
Edward Firth, an analyst with Keefe Bruyette & Woods said that banks only have themselves to blame. “We have seen interest rates rise 200 basis points, but they have not passed it on to customers.” This was a firecracker for a sector that was a major beneficiary of the crisis’s economic bailouts and still receives cheap funding from BOE.
