DeVere Group chief Nigel Green warns that raising taxes on lenders could push up borrowing costs, squeeze savers and drive investment overseas as Chancellor John Healey faces pressure to raise billions in his first Budget.
Labour’s looming tax raid on Britain’s banks risks turning a bid to plug the Treasury’s fiscal gap into a bill for millions of households, while handing rival financial centres an opportunity to poach business from the City of London, according to one of the world’s largest independent financial advisory groups.
Nigel Green, chief executive of deVere Group, warned that increasing the tax burden on lenders could feed through to mortgage costs, reduce returns for savers and weaken investment as Chancellor John Healey prepares his first Budget on 28 October.
The warning comes as banking shares have fallen amid market concerns that ministers could reverse a tax cut introduced by former Conservative chancellor Jeremy Hunt, or increase a separate levy on banks’ balance sheets.
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“Raising bank taxes might look like an easy win on a Treasury spreadsheet, but it’s a tax on lending, and lending is how Britain grows,” Mr Green said.
“Every extra pound taken from the banks is a pound that doesn’t go into a first-time buyer’s mortgage, a growing firm’s overdraft, or the tech that keeps UK finance ahead of the world.”
The government is weighing its options as it seeks additional revenue and attempts to rebuild its fiscal headroom. One proposal would restore the bank surcharge to 8 per cent, reversing a reduction made in 2023. Trade unions estimate that such a move could raise £9bn over four years, while ministers could also consider increasing the separate bank levy.
Britain’s lenders already face a substantial tax bill. Bank tax receipts rose 8.5 per cent to £39.1bn in the 2025-26 tax year, according to the figures cited by the sector. Banks pay corporation tax alongside a 3 per cent surcharge on profits above £100mn, taking their headline rate to 28 per cent, as well as a levy on their balance sheets.
Supporters of higher taxes argue that the sector can afford to contribute more, pointing to the roughly £15bn in profits reported by the four biggest lenders in the first half of this year. Those earnings have been supported in part by the gap between the interest banks charge borrowers and the rates they pay savers.
But Mr Green argued that taxing profits generated during a favourable interest-rate cycle risked imposing a lasting burden when conditions deteriorated.
“Bank margins swell and shrink with the interest rate cycle,” he said. “A tax rise set during the fat years stays in place through the lean ones.”
The wider concern is that higher taxes could make Britain less attractive to international financial groups deciding where to book business, employ staff and deploy capital.
The US, Gulf states and Asian financial centres are actively courting investment and talent, Mr Green said, warning that the UK should not make their task easier by increasing the cost of operating in London.
“Capital has never been more mobile,” he said. “Britain shouldn’t be making their pitch for them.”
The potential consequences extend beyond the banks themselves. Lenders could respond to higher costs in several ways, including adjusting loan pricing, deposit rates, spending or investment — although the extent to which any tax increase would be passed on to customers remains uncertain.
Mr Green argued that borrowers could face more expensive credit, savers could receive less generous returns and pension funds and individual investors could be affected through their holdings of bank shares and dividends.
“A tax sold as hitting the City ends up hitting households,” he said.
The debate presents Mr Healey with a difficult choice between securing near-term revenue and protecting a sector that contributes billions in tax and plays a central role in business financing. Finance also remains one of Britain’s internationally competitive industries, with ministers seeking to expand activity in fintech, artificial intelligence and digital assets.
Mr Healey has acknowledged that he faces decisions on bank taxation while describing lenders as woven into the fabric of the economy.
For Mr Green, the Budget will test whether that recognition translates into policy.
“A thriving, expanding sector is likely to deliver far more to the Exchequer over the next decade than any one-off grab,” he said.
The argument is ultimately about more than a single tax decision, it is also about whether the Treasury can raise the money it needs without undermining the investment and lending on which its growth ambitions depend.
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