UK banking sector generates £38.8 billion in taxes

UK Finance has published its report on the latest total tax contribution of the UK banking sector, produced by PwC, which shows that the sector generated £38.8 billion in taxes in the financial year to the end of March 2022. This means that the sector accounted for 4.7 per cent of the government’s total tax receipts during that period. The total contribution is comprised of £18.8 billion in taxes borne – those that are a direct cost – and a further £20 billion in taxes collected, such as income tax and employee national insurance.

Total employment taxes accounted for £21.9 billion of the total taxes contributed by the sector, equivalent to 6.3 per cent of all UK employment tax receipts. This reflects the large number of highly skilled workers employed in the banking industry.

The report also includes analysis of the UK’s tax competitiveness for banking relative to other leading global financial centres. London (45.3 per cent) currently has a similar total tax rate for a typical corporate and investment bank as Frankfurt and Amsterdam (both 45.4 per cent), but higher than New York (27.4 per cent) and Dublin (32.1 per cent). The report also contains forecasts of the total tax rates in 2024. For London, the forecasts are based on an increase in corporation tax from 19 per cent to 25 per cent and include potential scenarios for the bank surcharge paid by firms on UK profits.