The Chancellor’s missing billions: windfall tax on banks could’ve raised £12.5bn

London, 25 February - The Chancellor could have raised £12.5bn by taxing the windfall profits the UK's four biggest banks have made from the British public, according to new analysis from research and campaign group Positive Money.

HSBC was the last to announce today, reporting pre-tax profits of £22.1bn for last year. Collectively, HSBC, Barclays, NatWest and Lloyds Bank reported pre-tax profits of £45.7bn in 2025, coming in just below their 2024 record of £45.9bn. Profits have been driven by years of higher interest rates, paid to them both by borrowers and by the Bank of England, which pays interest on the risk-free reserves commercial banks hold with it. The central bank is making a loss because of this practice, the cost of which is borne by the Treasury, to the tune of £20bn per year.

Last year, Positive Money proposed replicating the Spanish windfall tax on banks by targeting UK retail net income (the profits they’ve made directly from the UK public) above a threshold of £800m with a 38% levy - in line with the Energy Profits Levy on oil and gas companies, which have also profited from the cost of living crisis. Using the latest results, Positive Money estimates this levy would have raised £12.5 billion from the 2025 profits of the big four UK banks alone, if Rachel Reeves had implemented it in last year’s Autumn Budget. 

Instead, in November, the Chancellor chose to extend the freeze on personal income tax and National Insurance thresholds for a further three years, from 2028-29 to 2030-31, which the Office for Budget Responsibility (OBR) estimated would comparatively only raise an additional £8.3 billion per year by 2029-30. This hits minimum wage workers particularly hard, as more are dragged into paying the basic rate of tax even if they are not working full-time. 

Profit reports have also been followed by announcements of bumper pay and bonus packages for bank CEOs, including a 20% rise for Lloyds’ chief executive Charlie Nunn, and a £6.6 million package for NatWest’s Paul Thwaite - the highest since his predecessor Fred “the Shred” Goodwin in 2006, before the latter oversaw RBS’ taxpayer-funded bailout and had his knighthood stripped by the Queen.  

Positive Money argues that these bonuses are both a reward for the profits themselves, and for successfully lobbying against a windfall tax, the absence of which in the Autumn Budget pushed up the share prices of both NatWest and Lloyds Bank. 

In the build-up to the Autumn Budget, higher taxes on bank profits had the support of the Trades Union Congress (TUC), centre left thinktank The Institute for Public Policy Research (IPPR), and over 65,000 members of the public who signed a petition organised by Positive Money and campaign organisation 38 Degrees.

Sara Hall, Co-Executive Director of Positive Money, said:

“Instead of squeezing the pips of ordinary people with stealth taxes in last year’s Autumn Budget, Rachel Reeves could have taxed the windfall profits of Britain’s biggest banks, and brought in billions more at the same time. 

“Banks have made these billions thanks to years of higher interest rates, off the backs of their customers and the Bank of England - the latter at a great cost to the UK public via the Treasury, which covers the central bank’s losses. The least the Chancellor could do is claw some of these billions back.”

“With emails between Peter Mandelson and Jeffrey Epstein shedding light on the lengths banks will go to for favourable policy from Governments, Chancellor Reeves should be distancing herself from bank lobbyists, not aligning herself with them. Nothing would signal this shift more clearly than a windfall tax on their record profits.”

Notes:

• HSBC results: https://www.hsbc.com/news-and-views/news/media-releases/2026/hsbc-holdings-plc-annual-results-2025 

• OBR estimates of how much freezing tax thresholds would raise (Nov 2025): https://obr.uk/economic-and-fiscal-outlooks/ 

• IFS analysis on how frozen tax thresholds impact minimum wage workers (Nov 2025): https://ifs.org.uk/articles/how-are-frozen-tax-thresholds-reshaping-who-pays-personal-taxes 

• Natwest and Lloyds shares soar after escaping Budget tax raid (Nov 2025): https://www.cityam.com/autumn-budget-banks-escape-tax-raid-after-industry-alarm/ 

• Lloyds Bank chief warns Rachel Reeves against higher taxes on City of London (Jul 2025): https://www.ft.com/content/ecd74fc5-0c66-42d3-b250-6da946277cdc 

• NatWest boss warns against higher bank taxes as lender’s profits rise 30% (Oct 2025): https://www.theguardian.com/business/2025/oct/24/uk-must-resist-raising-taxes-on-banks-says-natwest-boss-as-profits-leap 

• Bank bosses get huge pay rises in sign top City salaries back to pre-crash highs (Feb 2026): https://www.theguardian.com/business/2026/feb/13/paul-thwaite-natwest-ceo-payout-fred-goodwin 

• Positive Money gained over 65,000 signatures on a petition for a windfall tax on bank profits : https://you.38degrees.org.uk/petitions/taxthebanks

About Positive Money:

Positive Money is an international research and campaign organisation working to redesign our economic system for social justice and a liveable planet. Set up in the aftermath of the financial crisis, Positive Money is a not-for-profit company funded by charitable trusts and foundations, as well as small donations from its network of supporters. Find out more: www.positivemoney.org 

ENDS