Banking sector now pays £1 in every £8 of UK corporation tax
• UK banking sector’s total tax contribution rises to £36.7bn in 2017/18
• £1 in every £8 of corporation tax in the UK is now paid by the sector
• London has highest total tax rate out of five leading global financial centres
The UK banking sector contributed £36.7bn in taxes in the year to March 2018, up £1.3bn on the previous year and equivalent to 5.4% of total UK tax revenues, a report published today has revealed.
This year’s Total Tax Contribution Study for the UK banking sector, commissioned by UK Finance and based on analysis by PwC, found that banks now pay £1 in every £8 of corporation tax in the UK. Total revenue raised by corporation tax for the sector, including the banking surcharge, has increased by 13.6% since last year and is now over four times higher than the levels seen in 2014, despite the UK’s main corporation tax rate falling in that time.
The banking sector’s total contribution to the public finances has risen by £5.4bn since 2014, while overall banks are now paying the equivalent of over half (50.4%) their total profits in taxes. This is partly a result of sector-specific taxes such as the bank surcharge, which generated £1.8bn in the 2017/18 tax year, and the bank levy, which raised £2.8bn over the same period.
This year’s report also includes separate analysis by PwC on the comparative total tax rates faced by a typical corporate and investment bank in five leading global financial centres including London. This research finds that such a bank would face the highest total tax rate in London, reflecting sector-specific taxes in the UK:
Financial Centre Total Tax Rate (%)
London 50.6
Frankfurt 43.8
New York 34.2
Singapore 23.2
Dubai 22.7
Stephen Jones, Chief Executive of UK Finance, said:
“The banking industry’s contribution to the public finances continues to grow each year, with £1 in £8 of all UK corporation tax now paid by the sector.
“This underlines the need to ensure the UK remains a world-leading location for financial services investment in future, safeguarding the jobs and tax revenue generated by the industry.
“At a time when domestic and international events are forcing many banks to restructure their global operations, it is important to consider the UK’s competitiveness relative to other leading financial centres. This report shows that the UK’s tax competitiveness has been substantially eroded relative to other financial centres to which globally mobile corporate and investment banks based here could relocate.
“The industry and UK government are determined to ensure that the overall competitiveness of the UK as a global financial centre is maintained post-Brexit. Action in this light should include a rethink of bank taxation policies.”
Isabelle Jenkins, banking and capital markets leader at PwC, said:
“The banking sector is undoubtedly a major contributor to the UK economy and public purse. This year’s tax take from the sector reflects the extent to which it has risen to a series of regulatory and economic challenges to deliver £36.7bn to the Exchequer.
“This tax contribution is built on the efforts of a broad set of banking institutions with a globally diverse workforce operating across the UK.”