‘The 8% raid was avoided, the bill may not be’ as Healey’s bank tax puts mortgages and savings in focus

Chancellor John Healey has spared Britain’s banks the 8 per cent tax increase they feared. But the retreat from a more aggressive raid may offer little comfort to households and businesses if lenders pass the cost on through more expensive mortgages, weaker savings rates and reduced returns for investors.

That is the warning from Nigel Green, chief executive of deVere Group, one of the world’s largest independent financial advisory organisations, after Healey announced a temporary three-percentage-point increase in the bank surcharge.

The measure, due to take effect in January, will double the surcharge to 6 per cent for 15 months, taking the combined tax rate on UK banking profits above £100mn to 31 per cent. A separate levy on bank balance sheets will remain in place.

“Credit where it’s due, the Chancellor blinked,” Green says. “He was under enormous pressure to go to 8 per cent and leave it there for good, and he didn’t.”

Yet the reprieve for lenders could prove less reassuring for their customers.

“Banks don’t pay it out of thin air,” Green warns. “Every pound the Treasury takes is a pound that can’t be lent to a young couple buying their first home or a small firm trying to expand.”

The Government can point to the sector’s substantial profits. Britain’s banks made roughly £15bn in the first half of 2026, while their collective tax bill rose 8.5 per cent to £39.1bn last year. Supporters of the surcharge argue that lenders benefiting from lucrative interest-rate margins can afford to contribute more to the public finances.

But Green argues that strong profits today do not guarantee equally healthy margins tomorrow. As interest rates fall, the gap between lending and deposit rates could narrow, leaving banks to absorb a tax burden that remains even when earnings weaken.

The consequences, he suggests, may emerge gradually rather than through any single dramatic announcement.

“It shows up quietly, in a remortgage quote that’s dearer than it might have been, or a savings rate that never quite catches up,” he says. “Nobody gets a letter saying the Budget did it.”

Bank shareholders could also feel the effects through dividends and investment returns, including those held indirectly in pension funds and ISAs.

Healey has expressed gratitude for the role banks play in the economy. Green, however, sees a contradiction between praising lenders and increasing their tax burden.

The bigger test may come in spring 2028, when the surcharge is scheduled to fall away. Green argues that allowing the increase to expire as promised will be critical to preserving confidence in Britain as a destination for financial investment.

With financial centres across the Gulf and Asia competing for capital, talent and business, he warns that repeated tax changes could undermine London’s competitiveness just as artificial intelligence and tokenisation reshape the industry.

“Healey spared the City the worst,” Green concludes. “Households and businesses won’t be so lucky.”

Whether the surcharge ultimately raises substantial revenue without damaging lending will depend on how banks respond. But the political calculation is already clear: a tax imposed on lenders does not guarantee that lenders alone will bear the cost.