Shares in Britain’s banking giants surged ahead of John Healey’s maiden Budget after reports the Chancellor would raise taxes on the sector by a lower rate than originally expected.

The UK’s lenders have been bracing for a tax raid despite defensive lobbying from City chiefs. Healey is expected to increase the banking surcharge that sits on top of corporation tax from its current rate of three per cent.

But the increase will be temporary and will not return to the previous eight per cent it stood at in 2023, Bloomberg reported.

Lloyds shares surged 2.2 per cent on the news to 104.40p. Barclays was up two per cent to 430.50p and Natwest 1.7 per cent to 142.95p.

Banks are expected to be a top tax target for Healey in his maiden Budget following relentless campaigning from the Labour left and trade unions.

Industry bosses have warned any increase to the taxes paid by banks risk hampering global competitiveness and hurting investment.

The surcharge raised some £1.2bn for the Treasury last year. It is estimated that each percentage-point increase raises a further £400m each year.

Healey warned bank bosses of ‘challenging’ position

Healey met with UK bank bosses earlier this month, where he warned the country was facing a “challenging” fiscal outlook.

The leaders of Wall Street’s top banks have also warned of consequences following any increase to the UK bank tax rate. Dame Jane Fraser, a Scot credited with turning around Wall Street’s Citibank, said she was “concerned” at another charge on banks in Britain.

Meanwhile JP Morgan boss Jamie Dimon, well-regarded as one of the most influential figures in finance, said a bank tax would have “adverse consequences”.

JP Morgan revealed plans for a new UK megatower in the fallout of the 2025 Budget. But Dimon has previously warned the country turning “hostile” towards banks could make him “reconsider” the investment, which is projected to inject as much as £10bn over the next six years into the local economy.

The UK’s Big Four banks – Natwest, Lloyds, HSBC and Barclays – collected a combined £29bn in pre-tax profit for the first half of the year. A number of firms also upgraded their income target on the back of the elevated interest rate path triggered from the US-Iran war.

The Trade Union Congress, one of the biggest advocates for an increase to the bank tax rate, has argued banks must pay their “fair share” following the bumper profit hauls.