What insiders are fretting about
Several bankers also fear ministers think domestic lenders have fallen short in helping small businesses, and two people said a portion of any proceeds raised by an added levy might go toward lowering expenses for those companies.
Another pressure point: banks' recent bumper earnings. People close to the talks say strong profits could make a windfall tax harder for ministers to resist, although branding it as a short-term measure might blunt the backlash.
Politics, timing and temperature check
Prime Minister Andy Burnham's Labour government has Chancellor John Healey set to deliver the budget on Oct. 28, with meetings planned with bank chiefs next week. Tension rose following Labour's gathering in Liverpool last week. Many senior figures lauded Burnham's firm leadership after a lengthy stretch of political drift, yet they also pointed out that Healey offered scant detail on the economic plan.
"As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals," a Treasury representative said. One person familiar with the thinking said Labour could take confidence from the Conservatives under Margaret Thatcher imposing a bank windfall tax in 1981, while another said the move might appeal to voters with strong anti-bank views, including many Green Party supporters.
Some in the City doubt Labour would single out UK banks given its pledge to support British business and its focus on financial services as a growth engine.
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Who could be in and who could be out
The names in the frame are the UK's big four - Lloyds Banking Group Plc, Barclays Plc, NatWest Group Plc and HSBC Holdings Plc - which have benefited from higher rates. Positive Money reckons a tax on their UK profits could yield £18.9 billion ($25 billion). The Green Party is advocating a 38% windfall levy on banks, with the revenue earmarked to finance tax reductions for small- and medium-sized enterprises.
Foreign banks might avoid the hit, according to one person, because those with sizable UK footprints could shift jobs elsewhere or pull back on expansion. The government could defend that split as protecting London's international competitiveness. Earlier this year, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon cautioned that the bank could reconsider its new London headquarters plans if the UK turns "hostile" to lenders again.
What to watch and why it matters for your money
There is no clear signal yet on whether Healey will proceed, with officials keeping the budget tightly held after last year's plan was preempted by market-moving leaks. If it goes ahead, the windfall levy would probably come on top of the existing bank surcharge, which currently stands 3 percentage points above the 25% corporation tax rate. Since the 2010s, banks have additionally been subject to a balance sheet levy intended to defray the costs stemming from the financial crisis.
Last year, the Institute for Public Policy Research made the case for imposing taxes on banks to claw back what it described as the "staggering" state subsidy generated by the Bank of England's quantitative easing. Ex-Chancellor Rachel Reeves weighed higher bank taxes for her November 2025 budget but ultimately stepped back after heavy lobbying.
"To support investment, competitiveness and growth, the government should provide certainty by keeping bank taxation stable and avoid any further sector-specific tax increases," said a UK Finance spokesperson. Barclays, NatWest, Lloyds and HSBC representatives said they had no comment.
For everyday investors, the tells are Healey's sit-down with bank leaders next week and what shows up in the Oct. 28 budget. A UK-only windfall tax would shave earnings at the big four on top of existing charges, while carving out foreign banks could tilt competition inside the UK market.
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