Our submission to the Autumn Budget 2026

A ‘do no harm’ approach to Budget 2026

The starting point for Budget 2026 should be to avoid measures that weaken the UK’s competitiveness as a global financial centre. The industry recognises the fiscal constraints facing government and is not seeking broad reductions in headline tax rates. However, the cumulative burden, complexity and unpredictability of the UK tax system have increasingly become material factors in decisions about where firms locate activity, deploy capital and senior talent.

Sector-specific taxes – including those applying to banking, insurance and UK equity transactions – already leave important parts of the UK market facing a higher tax burden than many competitor jurisdictions. Work done by PwC and UK Finance shows that this has been a long-standing problem for banking in particular. Further increases, one-off windfall measures or new sectoral taxes would risk reducing UK-based activity and employment, weakening investor confidence and undermining the revenue base over time. Stability and predictability are therefore essential to protecting the UK’s long-term tax take as well as its global market position.

Higher sectoral taxes would also risk reducing the positive contribution that financial and related professional services firms can make to the wider economy. The government has rightly taken forward important regulatory reforms designed to support growth, competitiveness and investment, and these changes should help the industry play a stronger role in delivering the government’s ambition for good growth in every postcode. However, increased sector-specific taxes could undermine those positive developments by reducing the industry’s capacity to support households and businesses. In banking, this could mean less lending to drive investment, productivity and job creation: as Barclays’ CEO C.S. Venkatakrishnan has noted, ‘For every pound of capital that remains in the banking system, we lend about £8 to £10 into the economy.’1 In insurance, higher taxes could increase the costs for individuals and businesses of protecting themselves against risk and providing for their, and their employees’, future. For equity transactions, they could increase the cost of raising capital and make scaling up in the UK less attractive.

The harm to be avoided is therefore not only a loss of competitiveness for the industry itself, but a reduction in the industry’s ability to support wider economic growth across the country.

The government should also avoid excessive pre-Budget speculation and short-notice policy shifts. Recent experience has shown that uncertainty ahead of fiscal events can delay business and investment decisions and encourage damaging corporate and personal choices, for example where individuals are planning for retirement. We therefore believe that pension tax stability is particularly important under the ‘do no harm’ principle.

We appreciate the Chancellor’s decision to schedule the Budget for October to reduce damaging speculation. However, there is a continued need for a disciplined approach to Budget communications, which should be underpinned by a clear medium-term tax strategy.

Finally, there should be no changes to the current system around central bank reserves. We note that previous speculation around a levy on interest payments was unhelpful for investor confidence.

Use tax as a strategic lever for growth and competitiveness

Our landmark report, in collaboration with PwC, ‘No time to lose: Reasserting UK leadership in financial and related professional services’, was based on the views of more than 300 senior industry leaders, government figures, regulators, academics and other stakeholders. It sets out a practical roadmap for ensuring that the UK remains one of the world's leading international financial centres, while supporting stronger growth across the wider economy.

The report identified competitive tax and regulation as one of the five strategic imperatives for focus. Its core message being that tax policy should be treated as a strategic lever for growth, not simply as an administrative or compliance function.

HMT should lead tax policy development with clear ministerial direction, ensuring that HM Revenue and Customs’ (HMRC) operational and compliance priorities are aligned with the government’s wider growth agenda. HMRC has an important role as administrator and enforcer, but strategic choices on competitiveness, investment and economic growth should sit clearly with ministers and HMT. HMT must ensure that HMRC is acting proportionately and in a way that seeks to simplify compliance and collection, rather than continuing to layer new administrative burdens and complexities on the taxpayer.

Simplify, modernise and reduce frictional costs

The UK tax system is increasingly complex, costly and difficult to navigate. Frequent legislative changes, overlapping reporting requirements and expanding compliance obligations impose significant frictional costs on both business and government. This is particularly acute for financial and related professional services, where international reporting, operational tax requirements, transfer pricing, OECD Pillar Two compliance, digital systems and advisory costs can be substantial.

In the 2026 Budget, the government should commit to a tax system simplification programme focused on reducing unnecessary duplication, lowering compliance costs and improving the effectiveness of the system. This approach would help reverse the damaging decision taken during the Liz Truss administration to abolish the Office of Tax Simplification. Such an initiative should have as a key foundation the inclusion of a growth and competitiveness test for tax policy and a proportionality test for HMRC policy implementation and operational decisions, aligned with the government’s wider commitment to reduce regulatory costs, improve predictability and regulate for growth.

Reducing the cost of complying with the tax system would reduce costs for both the taxpayer and government without lowering tax rates. It would free up capital and management time for investment, innovation and job creation, while helping HMRC focus resources on the areas of greatest risk.

Reform, and seek to remove, Stamp Duty and Stamp Duty Reserve Tax on UK equities

Stamp Duty and Stamp Duty Reserve Tax on UK equities remain major international outliers and are likely to have increasingly negative impacts on domestic stock market liquidity and, by extension, the cost of capital and the level of business investment.

The previous Chancellor delivered the very helpful first step of creating a three-year exemption for newly listed UK companies, and the new Chancellor could now build on this welcome progress by delivering a broader reform programme. The government should set out a clear path towards wider reform and ultimate removal of Stamp Duty and Stamp Duty Reserve Tax on UK equities. This should be framed as a competitiveness and growth measure, designed to support deeper UK capital markets and greater domestic investment. It should not be offset by additional taxes elsewhere in financial and related professional services as this could counteract any growth stimulated by Stamp Duty reform.

A medium-term tax roadmap for financial and related professional services

Alongside immediate Budget decisions, the government should use Budget 2026 to begin work on a medium-term tax roadmap for financial and related professional services. This should provide greater certainty, benchmark the UK against relevant competitor jurisdictions, and identify reforms that would strengthen the UK’s ability to attract business, capital and talent.

One aspect that the roadmap could consider would be the stability of the pension tax regime, where confidence is critical to encouraging millions of savers to lock away capital for decades.

Any roadmap should include a commitment to not introduce any new sector-specific taxes or levies on our industry. It should specifically rule out any increase to the existing bank levy or bank corporation tax surcharge for the remainder of this Parliament, in line with the commitments in the Corporate Tax Roadmap. This would give firms across our industry the same certainty and stability the government has given to other businesses and would end the damaging annual speculation around bank taxes. This would, in turn, help facilitate long-term planning and decision-making, ensuring that the UK remains an attractive location for financial services firms and enabling the industry to play a vital role in scaling-up businesses and supporting households.

In the medium-term, government should review the bank levy and the bank corporation tax surcharge, which in their combined form make the UK an international outlier. Changes to the wider regulatory environment mean that the bank levy’s original purpose has been superseded. 

The roadmap should also consider how the tax system must adapt to digitalisation, tokenisation, artificial intelligence and more mobile forms of economic activity. These trends challenge traditional assumptions about location, income and capital. They also create an opportunity for the UK to lead internationally in designing a modern, competitive and resilient tax framework.