Healey poised to raise bank taxes in 28 October Budget as energy bills rise
The Guardian reports Chancellor John Healey is poised to lift the bank surcharge in his first Budget on 28 October, while energy support and rising Ofgem price caps also loom.
Banks in line for a tax rise
Senior banking executives have told the BBC they expect the sector to be "on the menu" when Chancellor John Healey presents his first Budget on 28 October. Healey has called the banks part of "the crown jewels" of the UK economy, yet he has not ruled out a raid on them. The Guardian reports he is poised to tax the sector to offset the damage the war with Iran has done to public finances.
The BBC reports the biggest four banks made around £15bn in profit in the first six months of 2026. They currently pay a 3% surcharge on top of the 25% corporation tax rate, plus a levy on their balance sheets. The BBC says the surcharge was cut from 8% under Rishi Sunak, while the Guardian credits Jeremy Hunt with the cut. Returning it to 8% could raise around £2bn a year.
- Bank levy
- 1.4 £bn
- Bank surcharge
- 1.2 £bn
The TUC has pressed for heavier taxation. Its general secretary, Paul Nowak, said:
Britain's big four banks are making a billion pounds a week, while bonuses have hit a post-crash record.
UK Finance, the sector's trade body, warned that further increases in bank taxes would weaken competitiveness, discourage investment and job creation.
Energy bills and the VAT cut
Andy Burnham announced on 21 July, days after taking office, that VAT on household electricity would be cut. He said:
We're taking immediate action to cut taxes on energy bills, put more money in people's pockets and bring back hope.
The rate fell from 5% to zero on 1 October, but only until 31 March, the end of the 2026-27 financial year. Gas bills were left out and still carry 5% VAT. The cut is being paid for by scrapping the £1.8bn Digital ID programme. Reports suggest the decision on extending it is likely to slip to the spending review, which could be as late as next autumn.
- Burnham announces VAT cut on household electricity bills
- VAT cut takes effect; Ofgem cap rises 4% to £1,723 a year
- Chancellor's first Budget
- Ofgem to confirm January price cap
- Electricity VAT cut scheduled to end
Ofgem's price cap rose 4% to £1,723 a year for a typical household on 1 October. Analysts and suppliers forecast a further rise of between 16% and 21% from January, and Ofgem will confirm the January cap by 25 November.
Budget squeeze and online sellers
Healey spoke to the BBC from the IMF meeting in Bangkok, where he was asked whether the Budget would be austere. He said:
People can see the global economic conflicts, they know the pressure it's putting on them, they understand it's putting pressure on the Government.
He did not say whether departments would receive extra cash for doctors' and nurses' pay, saying only that they should "manage with the budgets we've got". The IMF praised the UK's deficit reduction and urged him to "stay the course", while warning that inflation from the conflict could worsen before it eases. The Guardian reports borrowing costs have risen sharply, and analysts suggest that could as much as halve the £24bn cushion Rachel Reeves built against Labour's fiscal rules.
Healey is reportedly looking to spend over £1bn on bigger discounts for less well-off households, most likely through the Warm Home Discount, which gives a £150 yearly rebate to households on qualifying means-tested benefits. The Guardian reports it could be boosted by another £100.
The Times reports that Amazon, eBay and Temu would be made responsible for collecting VAT owed by retailers selling on their platforms, mainly targeting foreign sellers. The measure could raise as much as £1bn, money to be used to cut business rates for high street shops.
