The countdown is on. Two months out from Andy Burnham\u2019s inaugural autumn budget, bank executives are wringing their hands over whether the government will target their bumper profits with fresh taxes.<\/p>\n
The chancellor, John Healey, is reportedly considering a windfall tax on both banks and oil companies in the late October Westminster setpiece.<\/p>\n
The UK\u2019s four largest lenders \u2013 HSBC, NatWest, Barclays, Lloyds Banking Group \u2013 have generated \u00a3200bn in pre-tax profits over the past five years, largely off the back of rising interest rates<\/a>.<\/p>\n They are now in the crosshairs of campaigners \u2013 including the Trades Union Congress (TUC) and campaign group Positive Money \u2013 who say a tax increase could help cover rising household bills as part of Burnham\u2019s drive to tackle the cost of living.<\/p>\n The TUC\u2019s general secretary, Paul Nowak, who has been pushing hard for a new bank tax said: \u201cBritain\u2019s largest banks are making a fortune. Not because they\u2019ve suddenly become more competitive or improved their services to customers, but because high interest rates mean that, right now, they can sit back and watch the money roll in. Inflated mortgages are fuelling record bonus pots.<\/p>\n \u201cWith energy bills edging towards record highs this winter, the government is going to need to provide more support for households \u2013 and taxing banks\u2019 windfall profits is the obvious way to pay for it.\u201d<\/p>\n Any move in the UK would echo similar efforts in mainland Europe to make lenders pay more tax to help offset surging living costs and higher defence spending. Here are some of the tools different governments used, as well as the benefits and pitfalls of targeting the profits of some of the world\u2019s largest banks.<\/p>\n Spain: taxed and undeterred<\/p>\n Spain\u2019s prime minister, Pedro S\u00e1nchez, revealed plans for a windfall tax in 2022 that would raise \u20ac3bn<\/a> from banks over the following two years to help alleviate cost-of-living pressures.<\/p>\n It spooked investors, wiping more than \u20ac5bn <\/a>off the value of Spanish-listed bank stocks, but politicians pushed ahead: putting a 4.8% \u201csolidarity tax\u201d on the domestic revenue of banks whose income passed \u20ac800m. That included fees and net interest income, \u2013 the amount of money banks make from loan charges, minus what they pay on deposits.<\/p>\n The \u20ac800m threshold and the focus on domestic revenues meant it broadly excluded small local banks and most foreign lenders\u2019 Spanish operations.<\/p>\n Big banks and lobby groups filed legal challenges over the tax, while the European Central Bank (ECB) warned<\/a> that Spain risked disrupting monetary policy, and damaging lenders\u2019 capital positions, which help to cushion the blow of economic shocks.<\/p>\n Politicians eventually decided to extend the levy a further three years to 2027, after successfully raising \u20ac1.3bn in the first year,<\/a> and \u20ac1.7bn in 2024<\/a>. Banks now face a sliding tax rate of between 1% and 7%, with the highest rate hitting lenders such as Banco Santander whose annual revenue from interest and fees surpassed \u20ac5bn.<\/p>\n The extension triggered a fresh spate of legal challenges<\/a> by banks and lobbyists, and criticism from both the International Monetary Fund and ECB, which warned it could hit bank profits<\/a>, push up borrowing costs for low-income households, and make Spain\u2019s banks less competitive on the international stage.<\/p>\n Lithuania: a defence spending boost<\/p>\n Lithuania\u2019s government decided to roll out its own windfall tax on banks in 2023, after forecasts showed lenders were due to rake in \u20ac1.3bn in net profits that year. That was three times higher than 2022, following a surge in interest rates sparked by Russia\u2019s full-scale invasion of Ukraine.<\/p>\n The 60% tax, which applied to any net interest income that was 50% higher than the previous four-year average, was used to fund infrastructure projects and boost defence spending amid Russian threats.<\/p>\n Politicians agreed to exclude income from any newly agreed loans, to prevent a situation where banks stopped issuing mortgages and business loans to avoid paying tax.<\/p>\n The levy helped raise about \u20ac250m in 2023 and \u20ac247m in 2024<\/a>, representing 0.3% of the country\u2019s annual GDP, before being extended by an extra year. The European Commission appeared to support the move, saying it helped cut public debt at a time of regional security threats.<\/p>\n But the tax is said to have spooked foreign firms, with the central bank having repeatedly tried to lure new lenders \u201cwith no significant success\u201d, according to an EU report.<\/a><\/p>\n The banking sector said it also disadvantaged lenders serving local customers, while letting others such as Revolut, which is registered in the country but serves mostly non-residents, off the hook.<\/p>\n The world\u2019s most powerful banker, JP Morgan boss, Jamie Dimon, has repeatedly warned governments against increasing taxes on banks. Photograph: Mike Segar\/ReutersCzechia: \u2018unrealistic expectations\u2019<\/p>\n Czechia announced its own three-year windfall tax on banks to help cover consumers\u2019 soaring electricity and gas prices in 2022. The temporary measure, lasting from 2023 to 2025, involved a 60% tax on any profits that were more than double (120%) the previous four-year average.<\/p>\n Deeply unpopular with businesses, the tax also caused friction within the far-right ODC civic democratic party<\/a>, which said it was interfering with the free market and contradicted core conservative values.<\/p>\n Czech finance minister, Zbyn\u011bk Stanjura, talked about scrapping the tax a year earlier than planned, but later admitted the levy had not yet covered state costs linked to the energy crisis. While the finance ministry originally hoped to collect more than 30bn Czech koruna from the country\u2019s six largest banks, it quickly became clear they would fall short of those targets.<\/p>\n \u201cIt is unclear whether this was due to unrealistic expectations driven by a vision of easy extra revenue and convenient scapegoating of big corporations, or whether the delayed implementation of the tax (from 2022 to 2023) and the behavioural responses by businesses were not duly considered,\u201d the law firm A&O Shearman<\/a> said in a 2024 report.<\/p>\n The country ended up raising just 1bn Czech koruna, months before the tax expired in December 2025, according to figures reported by local broadcaster Ct24<\/a>.<\/p>\n Italy: a tax that fell flat<\/p>\n While plans for a windfall tax by prime minister Giorgia Meloni\u2019s rightwing government gained international attention<\/a>, it was one of the least effective levies.<\/p>\n Meloni\u2019s team shocked markets in August 2023 after revealing plans for a 40% tax on banks\u2019 net interest margin. The move drew the ire of banking lobby groups and wiped \u20ac10bn off shares in financial services companies, forcing politicians to water down the proposal a day later<\/a> with a cap that halved the estimated tax takings to \u20ac2.5bn, from \u20ac4.9bn.<\/p>\n The rules eventually came into force in October that year, but not before being diluted further.<\/p>\n Banks \u2013 which are already subject to higher corporation and regional taxes in Italy \u2013 were allowed to choose one of two options: pay a tax equivalent to 0.26% of the risky assets on their balance sheets \u2013 ensuring those with safer loans paid less \u2013 or keeping the money on their balance sheets but putting aside two-and-a-half times that amount into their own reserves to cushion the blow of any economic shock.<\/p>\n Unsurprisingly, all banks chose to put the money in reserve, scuppering original hopes that extra funds could help support mortgage holders and cut taxes.<\/p>\n However, Italy\u2019s deputy prime minister, Matteo Salvini, has now revived plans for a new tax three-year levy<\/a>, that would involve a 5% tax on the profits of Italy\u2019s 10 largest banks.<\/p>\n UK\u2019s four largest banks are expected to make \u00a360bn profit, based on latest market trends. Photograph: Bloomberg\/Getty ImagesWhat if the UK followed suit?<\/p>\n If current trends continue, the UK\u2019s four largest banks will rake in \u00a360bn in profits for 2026. Windfall taxes have been used on banks in the UK before<\/a>, notably in the early 1980s when Margaret Thatcher\u2019s then chancellor, Geoffrey Howe, accused high street banks of escaping the recession and in the 1990s by Labour chancellor Gordon Brown to generate extra revenue.<\/p>\n Calculations by campaign group Positive Money suggest that the UK could raise up to \u00a310.9bn this year from adopting Czechia\u2019s model; up to \u00a36.95bn by following Spain\u2019s sliding tax scale; and \u00a32.2bn by following in Lithuania\u2019s footsteps.<\/p>\n \u201cPlenty of countries have successfully taxed banks\u2019 windfall profits,\u201d the TUC\u2019s Nowak said. \u201cWe\u2019re calling for an increase in the bank surcharge<\/a> to raise billions for the Treasury to cut bills across the country. This is an easy win for government \u2013 and the chancellor should ask the banks to pay a fairer share\u201d.<\/p>\n