Does a serious government leak pre Budget confirm likely changes?
Peter Carville · Posted on: November 13th 2025 · read
In the same way that the months of uncertainly leading up to this delayed Budget have proved very difficult for consumers and savers as they wait to see what the Chancellor will introduce on 26 November, they have been equally challenging for the banking sector.
Six months of rumour and speculation are hardly conducive for a properly functioning engine of growth, with the result that business activity drops and liquidity hardens.
Whether you are one of the High Street titans, a global investment bank or a small overseas bank deciding whether to lend, invest or to open a new desk in London or Frankfurt, uncertainty and hiatus help no one. And if there is a tax raid on the banks this will harm lending to domestic households and businesses and will cause damage to London’s attractiveness as a hub for overseas investment. Capital is mobile after all.
There is no doubt a potential rise in the Bank Corporation Tax surcharge and an expanded Bank Levy would mark a notable policy shift - signalling the Chancellor’s intention to draw more revenue from the financial sector while facing tight fiscal constraints.
So, what will the Government do?
Given all the noise from the Treasury we don’t think there will be a hike in the main corporation tax rate. Raising the corporate tax rate would be counterproductive and will go against a promise to keep the rate the same for this Parliament – in fact MHA believe returning the rate to 19% would benefit the economy in the medium term by encouraging more corporate investment. More likely, for all corporate taxpayers, subtle rule changes can be made to quietly increase effective tax rates, rather than making noise in the press with new headline rates.
"Similarly increasing the banking tax surcharge, currently 3%, would make a lot of noise albeit “only” in the banking community. And there is no equivalent surcharge rate pledge for this Parliament as there is for the main CT rate."
However, more likely in our view is lowering the threshold for paying the surcharge from its current amount of £100m, back to a previous hurdle of £25m.
The bank levy is easier to tinker with since the rules are so complex. But it’s possible that the Chancellor will increase the Bank levy take, simply by lowering the £20bn balance sheet threshold to bring more banks into scope (it is estimated that only around 25 banks currently pay the charge).
While a higher Bank Levy move might strengthen the Treasury’s short-term position and play well politically, it would also erode profit margins, reduce retained capital, and potentially deter future investment within the UK banking system.
Furthermore, any tax rises for banks will be at odds to the government’s wider approach for banks, where regulatory rules are being reigned in to support efficiency and growth, such as proposed reform in ring-fencing rules and remuneration reform.
However, given the continuing noise in the press, and despite robust lobbying from the banking community, we easily see a scenario whereby the government both reverses the 2023 surcharge threshold to £25m and drops the levy threshold to say £15bn.
For the government, the twin measures could deliver a temporary fiscal boost in the 26 November Budget, but at a significant potential cost: slower credit expansion, higher borrowing costs, and reduced sector competitiveness. In short, the Chancellor faces a familiar trade-off - immediate revenue gains versus long-term financial resilience.
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