Chancellor set to rule out tax hikes on banks - report

(Sharecast News) - UK bank shares rallied on Thursday, on reports chancellor Rachel Reeves was minded to rule out increasing taxes on the sector. The chancellor is due to present her Budget at the end of the month, and is widely expected to hike taxes as she struggles to balance soaring government spending, mounting debt and sluggish economic growth.

But according to the Financial Times, Reeves is reluctant to increase the tax burden on the UK's banks.

The sector currently pays a 28% rate of corporation tax, higher than the standard 25%, as well as a separate balance sheet levy.

An unnamed source told the FT: "She's not minded to do this." Another added: "There's obviously a list of possible tax measures, but raising taxes on banks is a long way down that list."

A final person noted: "Banks are already paying a lot of tax. We aren't going to do it."

As at 0930 GMT, all of the FTSE 100's banks were trading higher.

HSBC Holdings was 1% higher at 1,095.4p, Barclays was up 1% at 411.35p, NatWest Group was 2% stronger at 601.2p, Lloyds Banking Group was ahead 2% at 91.54p and Standard Chartered was nearly 2% higher at 1,608.5p.

In contrast, the wider FTSE 100 was down 14 points.

Away from the blue chips, Close Brothers Group was up 2% at 429.2p.

The banking sector has seen profits boom in recent years, largely down to higher interest rates, and a number of Labour MPs are keen to raise taxes in response.

However, according to the FT, Reeves believes overtaxing firms could hamper growth and competitiveness.

Taxes paid by UK lenders are already notably higher than those paid by many international rivals.