UK Finance has warned the government that raising taxes on banks could increase mortgage costs and reduce banks’ capacity to lend.
In its submission for the October Budget, the banking industry body said any further rise in taxes aimed specifically at banks could make the UK less appealing to international banks and, in the end, affect how much households pay to borrow. It also cautioned against changing how banks receive interest on reserves held at the Bank of England as a way to raise more money from the sector. Such changes, it said, could affect the pricing of mortgages and savings accounts, along with banks’ ability to lend and invest.
The organisation urged the government to keep the current tax system for banks and instead produce a long-term plan to boost the international competitiveness of the UK’s financial sector. According to figures in its submission, a typical corporate and investment bank in London faces a total tax rate of 46.5%, compared with 42.2% in Amsterdam, 39.1% in Frankfurt and 27.9% in New York. It warned that further tax increases on banks could widen that gap and make London less attractive as a global financial centre.
The submission also includes housing proposals, arguing that banks and other financial firms should have a central role in government plans to boost homeownership and housebuilding. UK Finance said the number of first-time buyers getting onto the housing ladder rose to 391,000 in 2025, from 332,000 in 2024. The group also called on the government to proceed with its proposed First-Time Buyer ISA, designed to help people save for a deposit.
It said financial services should be more closely involved in efforts to make buying and selling homes quicker and cheaper. It supported measures such as better sharing of property information and improved links between payment systems. The banking body also wants the government to use public finance to draw more private investment into housing and regeneration projects.
UK Finance recorded £176.6bn of new residential house-purchase lending in 2025, with around 83% of that, or £146.1bn, outside Greater London.
It also called for a long-term framework to encourage households to improve the energy efficiency of their homes. This should combine government support and incentives with private lending, while protecting consumers, it said. The organisation said banks were already working with the government on its Warm Homes Plan, and it urged that the proposed Warm Homes Agency be set up urgently. A stronger market for home improvements could create growth while helping households cut energy use and prepare for climate-related risks, it said.
UK Finance also called for a new partnership between government and the financial sector to identify investment opportunities across the UK, along with measures to improve access to finance for small businesses. The organisation said a profitable banking sector mattered because it let banks build capital, attract investment and keep lending during economic downturns.
