Banks warn on UK tax rate burden as threat of 'no-deal' Brexit looms

The banking sector has demanded a "rethink" of tax policies, saying it is "important to consider the UK's competitiveness" as the government steps up its preparations for a possible no-deal Brexit.

UK Finance, which represents major lenders, issued the broadside alongside figures to help make its case, which suggested the sector currently pays £1 in every £8 of corporation tax in the UK.

The sums, based on analysis by PwC, showed banks handed over a total of £36.7bn to the Treasury in tax during the last financial year.

UK Finance said the industry's contribution to the public finances was £5.4bn up since 2014, with banks now paying the equivalent of 50.4% of their total profits in taxes.

It cited additional taxes on the sector, such as the bank surcharge and the bank levy for raising the percentage figure.

The body released its report as banks continue their preparations for Brexit - with many international banks in the City of London (LSE: CIN.L - news) relocating jobs to the continent as a precaution to ensure continued access to EU markets whatever happens.

Crucially, the study included a statistic that London has the highest total tax rate out of other leading financial centres globally.

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It put London's at 50.6% with Frankfurt following at almost 44% and New York at 34.2%.

Stephen Jones, chief executive of UK Finance, said: "The banking industry's contribution to the public finances continues to grow each year, with £1 in £8 of all UK corporation tax now paid by the sector.

"This underlines the need to ensure the UK remains a world-leading location for financial services investment in future, safeguarding the jobs and tax revenue generated by the industry.

"At a time when domestic and international events are forcing many banks to restructure their global operations, it is important to consider the UK's competitiveness relative to other leading financial centres.

"This report shows that the UK's tax competitiveness has been substantially eroded relative to other financial centres to which globally mobile corporate and investment banks based here could relocate.

"The industry and UK government are determined to ensure that the overall competitiveness of the UK as a global financial centre is maintained post-Brexit. Action in this light should include a rethink of bank taxation policies."