Budget 2026: Healey Doubles Bank Surcharge for 15 Months, Keeps Fiscal Rules With £15 Billion Headroom

What happened

Chancellor John Healey presented Budget 2026 on 28 October, HM Treasury says ^[1]. Its main revenue step is temporary: the extra corporation tax on bank profits doubles to 6% from 3%, bringing in £1.5 billion over 15 months and expiring on 31 March 2028 ^[1]. That revenue goes toward a one-off £100 energy payment in 2027 for as many as 20 million English homes ^[1]. Healey also put money behind the £15 billion Defence Investment Plan, lifting military spending to 2.7% of GDP in 2027-28, and kept the 5p fuel duty cut for another six months ^[1].

How it affects Americans

By the government's count, it still has £15 billion of room under its stability rule in 2029-30; that cushion is £9 billion smaller than in March, a drop it attributes to the conflict pushing up interest on debt ^[1]. Global borrowing costs have hit multi-year highs, Reuters notes, and markets wanted proof that London would stick to its rules; Reuters reports the 10-year gilt yield fell to around 5.31% and the pound traded at $1.3295 after the statement ^[3]. Bank stocks gained too, with Lloyds, Barclays and NatWest up between 3.3% and 3.6%, according to Reuters ^[3]. For U.S. allies, the government pledged £0.5 billion more in winter military aid to Ukraine and said next year's Spending Review will show how it reaches 3.5% of GDP on defence by 2035 ^[1].

The Square Mile angle

The City of London Corporation backed the Budget's direction but pressed on the bank tax. Chris Hayward, its Policy Chairman, said "It's important that the rise in bank taxation is time-limited – it must end as scheduled" ^[2]. He praised the decision not to change the main Capital Gains Tax rate, and the £20 billion going to two state-backed lenders, the British Business Bank and National Wealth Fund ^[2]. Hayward argued Healey should have scrapped stamp duty on share purchases, saying that would help firms list in London and strengthen the City's standing ^[2].

What we know

Confirmed

• The bank surcharge doubles to 6% and expires on 31 March 2028 ^[1].
• The government reports £15 billion of stability-rule headroom for 2029-30 ^[1].
• The £15 billion Defence Investment Plan now has full funding, £4.7 billion of which had none before ^[1].
• The City of London Corporation wants the bank tax rise to end as scheduled ^[2].

Still being reported

• Market moves in gilts, the pound and bank shares, reported by Reuters ^[3].
• Banks had been preparing for a possible rise to 8%, Blick Rothenberg tax partner Chantal Van Stipriaan told The Independent ^[4].