Lloyds Banking Group PLC (LSE:LLOY) and NatWest Group PLC (LSE:NWG) rose after the chancellor cut the surcharge on their profits from 8% to 3%.
There had been speculation that the sector would be another target for Jeremy Hunt but deep in the recesses of the autumn statement was some good news for the sector.
“5.27 Following the decision to proceed with the CT 6% rate increase to 25%, the changes to the Bank CT Surcharge will also go ahead. This means that banks will be charged an additional 3% on profits above £100 million – they will pay a 1% higher rate of CT than previously.”
Buried in the footnotes of Jeremy Hunt's Autumn Statement is a massive tax cut on bank profits. Surcharge cut from 8% to just 3%. pic.twitter.com/NNscxGsAdl
— Adam Bienkov (@AdamBienkov) November 17, 2022
Given the increase to corporation tax to 25% this still mean banks will overall be paying more tax, 28%, rather than 27%, but it is still better than some had feared.
Richard Milnes, UK banking tax partner at EY, said: "The UK banking sector will be reassured that there’s now clarity around the banking surcharge and that the rate will stay at the enacted 3% when corporation tax increases to 25% next April."
"The sector will be particularly relieved there won’t be a further tax burden placed on it which could have detrimental effects to UK banking competitiveness on the global stage.”
Michael Hewson chief market analyst at CMC Markets said: “There was no windfall tax on the banking sector which is a welcome relief for the likes of Lloyds and NatWest Group.”
Lloyds gained 1.1% and NatWest rallied 1.3%.