UK banks now contribute almost 5% of government revenue image credit shutterstock

The UK banking sector contribution to government overall tax receipts is at a decade-long high. Specifically, the banking sector now contributes 4.7% of total UK government tax receipts.

Contribution breakdown

The £44.8bn total is made up of £24.1bn in taxes borne, including corporation tax and the bank levy. The balance of £20.7bn in taxes collected includes income tax and employee national insurance contributions.

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The UK banking sector contributed £10.8bn in corporation tax (including the bank surcharge) and £24.9bn in employment taxes. These represent 12.2% and 5.9% respectively of the government’s total tax receipts in these areas. The employment tax figure reflects the large number of highly skilled workers the banking industry employs across the UK.

International comparison

PwC has assessed the total tax rate (TTR) of a model bank operating in the UK and compared this with other leading global financial centres. By doing so, PwC aims to provide a holistic comparison of the tax environment in London compared to New York, Frankfurt, Amsterdam and Dublin. The 2024 total tax rate figures are:

  • London – 45.8%
  • New York – 27.9%
  • Frankfurt – 38.6%
  • Amsterdam – 42.0%
  • Dublin – 28.8%

UK banks tax liability far in excess of US, EU peers

There is now a notable difference in the London TTR and other European countries. A principal reason for the large variation is the continued operation of the bank corporation tax surcharge and the bank levy in the UK. This is in contrast to the approach in the EU, where earlier this year, the Single Resolution Board confirmed that the EU’s Single Resolution Fund had reached its target level.

David Postings, Chief Executive of UK Finance, said: “Financial services are one of the UK’s strengths and this report demonstrates the banking sector’s important contribution to the UK’s tax base. The sector also supports a large number of skilled jobs across the country and is a key contributor to economic growth.

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“Banks based in the UK pay a significantly higher rate of tax than those in New York and, because contributions to the EU’s Single Resolution Fund have now been suspended, they are expected to pay notably higher rates of tax than in other European capitals. The overall tax environment has an important bearing on investment decisions and growth and is something that needs to be considered in terms of our international competitiveness.”