Banks braced for Budget battering - as unions claim whopping 35% windfall tax would raise £60bn

By HUGO DUNCAN, BUSINESS EDITOR and ANGHARAD CARRICK, BUSINESS NEWS EDITOR

Updated: 00:02 GMT, 28 October 2026

John Healey looks set to launch a punishing raid on banks today just hours after bumper profits at HSBC sparked a pre-Budget row over windfall taxes.

The Chancellor is expected to increase the bank surcharge from 3 per cent to as high as 8 per cent in a move that will delight unions and the Left despite warnings it will hold back the economy.

The TUC claimed hiking the levy to 8 per cent would raise more than £2billion a year – but added that increasing it to 35 per cent would deliver a whopping £15billon a year.

That would amount to a £60billion windfall over four years, it said.

Urging Healey to press ahead with a tax raid to pay for help lowering household energy bills, TUC general secretary Paul Nowak said HSBC's latest results 'make it blatantly obvious banks can afford to contribute more'.

But Shadow Chancellor Andrew Griffith said higher taxes would push up 'the cost of credit for businesses and mortgage-holders' while also 'rendering the City less competitive than its international rivals'.

John Healey prepares to deliver his first Budget as Chancellor

The war of words came after HSBC – Britain's biggest bank with operations around the world – reported a 32 per cent jump in third quarter profits to £7.2billion.

And in a blow to Healey, the lender cut its growth forecasts for the UK economy to just 1.1 per cent for 2027 having previously pencilled in 1.4 per cent, as higher inflation and interest rates dampen consumer spending and the housing market.

'In the UK, the outlook has deteriorated and GDP growth forecasts are lower,' the bank said.

But it was the profits haul that caused a stir in Westminster, and while less than a fifth of it came from HSBC's UK operations, this still amounted to £1.4billion.

HSBC also announced plans to return more cash to investors through a £750million share buyback.

The figures – hot on the heels of bumper profits from Barclays last week – sparked fresh calls for windfall taxes on the industry.

However, HSBC shares fell more than 5 per cent on Tuesday as the results disappointed investors, with the slump seeing the bank lose its crown as the most valuable company in the FTSE 100 to oil giant Shell.

Bank shares have been dented in recent weeks as speculation of a windfall tax mounted.

Banks in London already face higher taxes than in other financial centres such as New York

The current surcharge comes on top of the main rate of corporation tax – meaning banks already pay a higher rate than other businesses.

The extra levy on the banks was cut by the Tories from 8 per cent to 3 per cent in 2023 at the same time that corporation tax was raised from 19 per cent to 25 per cent.

If it rises again, HSBC is not expected to be hit as hard by a higher bank levy as other lenders such as Lloyds and NatWest because it makes most of its money outside the UK.

Calling on Healey to act, Nowak said: 'Banks have seen profits soar while everyone else has struggled. With eye-watering profits, bonkers bonuses, and chief executives making more in two days than most make in a year, it's clear that banks can afford to contribute more. The case is now irrefutable – it's time to tax the banks to cut bills.'

While talk of tax raid has sparked fears banks may leave the UK, HSBC finance chief Pam Kaur dismissed suggestions it may move its headquarters from London.

'That's just not on the table,' she said.

Julian Jessop, economics fellow at the Institute of Economic Affairs, said 'calls for a windfall tax on banks in response to HSBC's higher profits are both predictable and misguided'.

He said shareholders and millions of savers who own bank shares through their pension funds will lose out through lower profits and dividends, adding: 'Customers will also pay through higher bank charges, while employees will face lower wages.

'Everyone will lose if banks cut jobs and investment, or move activity overseas.'

UK Finance has warned that a fresh tax raid will make the UK even more of an international outlier, pointing out that UK banks are currently taxed at a rate of 46.5 per cent once employment levies and VAT are taken into account. That compares with 39.1 per cent in Frankfurt and 27.9 per cent in New York. 

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