A group of challenger and specialist lenders including Revolut, Monzo and Shawbrook has asked the Chancellor to raise the profit allowance on the 3% bank surcharge fivefold to £500m, a change they estimate would cost the Treasury £39m.
Some of the UK's fastest-growing banks have written to Chancellor John Healey ahead of the Budget, asking him to shield mid-sized lenders from the sector-specific tax that bites once profits pass £100m.
The letter, first reported by Sky News and seen by City AM, was signed by senior executives including Revolut UK chief executive Francesca Carlesi and Monzo's Diana Layfield. Shawbrook chief executive Marcelino Castrillo and Paragon chief executive Nigel Terrington also put their names to it. Investec, Aldermore and OSB are among the other lenders backing the request.
The numbers behind the ask are straightforward. The banking surcharge is levied at 3% on top of corporation tax, taking the overall rate on bank profits to 28%. At present, the first £100m of profit is exempt. The group wants that allowance raised to £500m.
By the signatories' own analysis, the change would cost the Exchequer £39m. They argue that surcharge receipts would still remain significantly above 2025 levels under every scenario they modelled.
The group said it recognised the fiscal pressure on the government. It warned, however, that any rise in the surcharge rate would have a significantly negative and disproportionate impact on mid-tier and specialist banks and would damage investor sentiment. The lenders also said the current design of the surcharge was disproportionate to the systemic risk they pose.
The signatories say they account for 60% of UK lending to small and medium-sized businesses, a figure they use to underline their role in financing the wider economy.
The lobbying push is set against calls for a tougher approach. Campaign group Positive Money has suggested a windfall tax on the big four banks could raise £19bn. Industry body UK Finance has separately written to the Chancellor warning against further tax rises, with chief executive David Postings pointing to the sector's existing tax contribution and its role in lending to households and SMEs.
For founders and investors, the cap-table angle lies in valuation. A threshold that bites at £100m of profit caps the after-tax earnings that growth-stage lenders can present to buyers and public-market investors as they scale. Monzo is in early talks over a potential sale to Nubank at up to £10bn, while Revolut is lining up a listing. Both valuations rest on expectations of rising profits that would fall increasingly within the surcharge net.
Lifting the allowance to £500m would, on the lenders' figures, leave more of that profit growth taxed at the standard 25% corporation tax rate, rather than 28%.
The decision now rests with the Treasury. Healey is expected to set out his tax plans at the Budget, where pressure to raise revenue will be weighed against the government's stated aim of supporting growth in UK financial services.
Original source: City AM — https://www.cityam.com/revolut-and-monzo-urge-healey-to-raise-bank-tax-threshold/
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