Lloyds shares rise nearly 4% after temporary bank surcharge increase set at 6%
Key Facts
Lloyds shares rose nearly 4% after the UK government announced a temporary increase in the bank surcharge on profits to 6%, according to a report on stock moves following the budget. The rise came after earlier estimates pointed to a possible increase in the rate from 3% to 8%. The decision means the additional tax burden will increase, but remain below the level that had raised industry concerns before the announcement. The stock closed at 5.4 on 27 October, according to EL7 data, which did not specify the currency. The move follows fluctuations in closing prices in recent days, with the stock falling from 5.49 on 21 October to 5.33 on 23 October, before rising to 5.42 on 26 October.
Tax concerns had weighed on UK bank shares ahead of the budget. On 16 October, EL7 published a story on the sector's share price decline amid reports of potential tax increases. Industry estimates considered the option of reversing previous cuts to the bank surcharge, which could raise it from 3% to 8% and generate more than 2 billion pounds sterling a year. The bank surcharge is an additional tax on banks' profits, on top of corporation tax, according to the report published before the budget. Against this backdrop, setting the temporary increase at 6% eased the impact of the higher scenario that had been considered before the announcement.
The tax debate comes as the government records substantial revenues from the banking sector. HM Revenue and Customs estimated total receipts from income tax, National Insurance, corporation tax, bank levy and bank surcharge at about 39.1 billion pounds sterling in the 2025–2026 financial year. Receipts rose by 3.1 billion pounds, or 8.5%, from the previous financial year. Receipts from the bank surcharge alone amounted to 1.2 billion pounds, up 0.2 billion, or 20.1%, year on year. The authority attributed the increase in this item to higher taxable profits.
The public debate over banks' contribution has also drawn on the sector's profits in recent years. A Trades Union Congress official said, according to Investing.com before the budget, that HSBC, NatWest, Barclays and Lloyds had collectively made 200 billion pounds sterling in pre-tax profits over five years, as interest rates rose. By contrast, Chancellor Rachel Reeves Haley stressed before the budget the role banks play in supporting economic growth. She told reporters in Bangkok that they are "an established part of the economic fabric of this country and its future prospects." The remarks place the tax debate within the government's effort to balance revenues with the sector's role in the economy, without changing the fact that the planned increase is temporary.
Attention now turns to Lloyds' third-quarter results, scheduled for release on Thursday 29 October at 7 a.m. Chief Financial Officer William Chalmers will give a presentation the same day at 9:30 a.m. The results will allow investors to track the bank's performance and profitability before assessing the surcharge's effect on its accounts. On the same date, the Bank of England will release its September Bankstats data. The October Money and Credit report is scheduled for release on 30 November, according to the central bank's calendar.