Business · Companies · 4 hrs ago
Santander UK faces £100m cost from higher UK bank tax
The UK government will raise the bank-profit surcharge from 3% to 6% for 15 months, starting in January 2027.
The change is expected to cost Santander UK about £100 million before tax between January 2027 and March 2028.
The government says the temporary tax rise will help fund support for people facing higher living costs.
The surcharge was set at 8% in 2016 after the financial crisis, then cut to 3% in 2023.
The tax is expected to raise £1.475 billion across the banking sector, although the UK budget watchdog says some banks may move profits abroad, making the total uncertain.
Analysts warn the higher tax could make borrowing more expensive and put pressure on the UK economy, while the government expects little effect.
Santander UK expects a gross cost of about £100 million from a UK bank tax increase.
The government is raising the surcharge on bank profits from 3% to 6%.
The increase is expected to apply for 15 months, from January 2027 to March 2028.
The measure is forecast to raise £1.475 billion across the banking sector during that period.
The Office for Budget Responsibility says the forecast already accounts for some banks moving profits out of the UK.
- Who
- Santander UK and other banks affected by the tax increase.
- What
- Santander UK faces an estimated gross cost of about £100 million from the higher surcharge on bank profits.
- When
- The increase is expected to apply from January 2027 to March 2028.
- Where
- The United Kingdom.
- Why
- The UK government is increasing the surcharge on bank profits from 3% to 6%. The finance minister said the temporary measure would help fund support for the rising cost of living.
UK government
Banking sector and its critics
Purpose
UK government
The government says the temporary tax increase will help fund measures to ease the rising cost of living.
Banking sector and its critics
Banks and analysts warn that higher taxes could make lending more expensive and weaken economic growth and competitiveness.
Impact
UK government
The government believes the effects will be imperceptible.
Banking sector and its critics
RBC Capital Markets analyst Benjamin Toms says the measure could have secondary effects, including more expensive credit and additional headwinds for the UK economy.
Downing Street introduced an 8% surcharge on bank profits after the financial crisis.
The Conservative government reduced the surcharge to 3%.
The UK government announced it would raise the surcharge by 3 percentage points in its new budget.
The higher surcharge is expected to apply for 15 months.
- Santander UK estimated cost
- About £100 million gross
- Bank surcharge
- Increasing from 3% to 6%
- Expected duration
- 15 months
- Sector-wide impact
- £1.475 billion
- Period of application
- January 2027 to March 2028
What people are saying
The size of this effect is uncertain
makes it more difficult