Budget 2021 - PwC comments on banking sector

Isabelle Jenkins, Leader of Financial Services at PwC UK, said:

"The Chancellor's announcement today that the UK corporation tax rate will increase from 19% to 25% from April 2023 had been trailed in recent days, even if the single increase was unexpected.

"With this in mind, the banking sector was watching closely to see whether the Government would recognise the potential detrimental impact such a move would have on international competitiveness for banks operating in the UK if the 8% banking surcharge currently in place is retained alongside this increase in the headline rate. 

"The sector will therefore welcome the recognition of this issue by the Chancellor in his speech and the clear indication that the Government considers the overall tax rate for banks will be too high if there is no action taken.  We await the outcome and proposals of the Government review which is expected to be announced in the Autumn. 

"Today's announcement is made against a backdrop where the competitiveness of the UK for banks is under considerable pressure.  A recent PwC survey looked at the tax burden for the banking sector in an international context and showed that, on a comparative basis, the effective tax rate for a model wholesale banking activity, taking into account both taxes borne and collected, was already some 13% higher in the UK than in New York.  

“The banking sector will be hugely important to credit creation in the coming months in generating growth as the UK economy starts to recover from the pandemic. The Government's clear recognition of the need to review the bank surcharge is therefore to be welcomed."