The UK banking sector paid £39.7 billion in taxes in the financial year to March 2019, a new PwC and UK Finance report has found, with banks seeing a 50 per cent rise in taxes borne over the past five years.

This increase is largely due to the introduction of sector-specific taxes such as the bank corporation tax surcharge and the bank levy, together with irrecoverable VAT which is significant for the sector.

The report found that the banking sector's tax contribution accounted for 5.5 per cent of total UK tax receipts. Half of this contribution was paid by foreign-headquartered banks and the other half by UK-headquartered banks. Employment taxes accounted for £21.8 bn of the total taxes paid by the sector, equivalent to 7.3 per cent of all UK employment tax receipts, reflecting the large number of highly skilled workers employed in the banking industry. 

The report also includes analysis of the UK's tax competitiveness for banking relative to other leading global financial centres. London continues to have the highest total tax rate for a typical corporate and investment bank out of the three major financial services centres surveyed. The rate in London is 47.1 per cent, 13.6 percentage points higher than New York City (33.5 per cent) and 2.4 percentage points higher than in Frankfurt (44.7 per cent).

Stephen Jones, Chief Executive of UK Finance, commented:

The UK banking sector's continued success contributes significantly to the public finances, our economy and wider society. However, there is no room for complacency.

?At a time of economic uncertainty, policymakers should focus on making the UK the best place in the world for financial services providers to invest and do business. This should include a rethink of bank taxation policies that prioritises our global competitiveness.

Andrew Packman, Tax Partner at PwC, commented:

The banking sector continues to be a significant contributor to the public finances. It remains important to balance the need to drive commerce and generate tax revenues with ensuring that London remains an attractive global financial centre.