Windfall tax on banks could raise £11 billion

London, 31 July 2025 - A windfall tax on the profits of Britain’s four biggest banks could raise £11 billion for the Treasury according to new analysis from think tank Positive Money.

Britain’s ‘Big Four’ banks - Barclays, NatWest, Lloyds and HSBC - are on track to make a record £48 bn profit in 2025, based on their results for the first half of this year, the last of which were announced by HSBC this morning. Collectively, their pre-tax profits so far this year stand at £24.1 bn. 

Banks have posted record profits in recent years thanks to the Bank of England paying higher interest rates, the cost of which is borne by the public, with the Treasury spending tens of billions of pounds a year to cover the central bank’s payouts to the City. Positive Money proposes the UK follows Spain in recouping these windfalls, with a levy targeting net income from domestic retail banking above a threshold of £800m.

Positive Money estimates that a 38% levy, in line with the successful Energy Profits Levy on oil and gas companies, would be expected to bring in £11.3 bn from the big four banks this year, based on their results for the first half of 2025.

The group says that this would be enough to scrap the two-child benefit cap, estimated to cost the government up to £3.5 billion annually, and to cover the cost of the government’s recent u-turn on welfare.

The CEOs of Lloyds Bank, HSBC and Barclays have all warned the Chancellor against increasing taxes on bank profits in the last week, arguing it would threaten the City of London’s international competitiveness and the UK’s economic growth. 

But the windfall levy proposed by Positive Money has been designed to only target banks’ domestic retail operations, which mitigates the risk of banks threatening to move their global or investment banking operations elsewhere. 

Simon Youel, Head of Policy and Advocacy at Positive Money, said:

“The public is paying the price of banks' record profits. At the same time as considering further spending cuts and tax rises for workers, the government is quietly handing over tens of billions of pounds a year to the Bank of England to cover the costs of higher interest rates, much of which is ending up in the pockets of banks’ shareholders.

“Recouping the bill for banks’ expensive free lunch should be a no-brainer, and can even be done in ways that protect the sector’s international competitiveness.

“While banks should be profitable, there is no compelling reason to allow banks to extract such enormous rents from the rest of the economy. The money and payment services banks provide are an essential public utility, like energy. Just as energy companies shouldn’t be able to profiteer, neither should banks - taxing windfalls makes sense for both.”

Notes:

• Positive Money’s full analysis can be found here: https://positivemoney.org/uk/update/how-the-government-could-reclaim-the-huge-payouts-to-banks/ 

• Today, the CEO of HSBC cautioned the Chancellor against raising taxes on banks: https://www.theguardian.com/business/2025/jul/30/hsbc-boss-says-rachel-reeves-putting-up-bank-taxes-would-harm-uk-growth 

• The CEO of Lloyds Bank warned Rachel Reeves against raising taxes on banks last week after the bank reported Q2 profits that were 31% higher than Q1: https://www.ft.com/content/ecd74fc5-0c66-42d3-b250-6da946277cdc 

• The CEO of Barclays also warned the Chancellor against raising taxes on banks this week after Barclays reported its profits for the first half of 2025 were up 23% to £5.2 billion this week: https://www.independent.co.uk/news/business/rachel-reeves-barclays-lloyds-banking-group-government-chancellor-b2797891.html 

• Barclays announced share buybacks and dividends payouts worth £1.4 billion: https://www.reuters.com/business/finance/barclays-profit-rises-23-trump-tariff-turmoil-lifts-trading-2025-07-29/ 

• The Resolution Foundation think tank says axing the two-child benefit cap would cost £3.5bn and would lift 470,000 children out of poverty: https://www.resolutionfoundation.org/comment/what-should-the-government-prioritise-when-tackling-its-welfare-trilemma/ 

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