FTSE 100 banks face Budget windfall tax hike – but this one may be the clear winner


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Reports suggest that the big FTSE 100 banks may be in the firing line during next week’s Budget. Speculation is mounting that Chancellor John Healey will hike the banking tax surcharge as he battles to balance the country’s books.

Currently, the big lenders pay the standard 25% corporation tax, plus a 3% sector ‘windfall’ tax. There is talk that the government could push that back up to 8%. Analysts at KBW estimate it could raise over £2bn a year for the Treasury, but wipe 6% off lenders’ earnings.

Should you buy HSBC Holdings shares today?

Before you decide, please take a moment to review this report first. Despite ongoing uncertainties from US tariffs to global conflicts, Mark Rogers and his team believe many UK shares still trade at substantial discounts, offering savvy investors plenty of potential opportunities to learn about.

That’s why this could be an ideal time to secure this valuable research – Mark’s analysts have scoured the markets to reveal 5 of his favourite long-term ‘Buys’. Please, don’t make any big decisions before seeing them.

Pre-budget speculation often comes to nothing, and basing investment decisions on rumours is a risky game. But for income investors, it is a genuine worry.

Don’t invest on speculation

Banks are an easy political target, yet this could backfire. Industry group UK Finance warns the hike would choke off £10bn in bank lending by 2029. Luckily, we don’t do politics on The Twelfth Magpie, otherwise I’d be debating the pros and cons all day.

The windfall tax is less of an issue for smaller, challenger banks, as it only kicks in once annual profits top £100m. Larger mid-cap challengers will pay if they cross this line.

It’s a live risk for the big boys but crucially, it only applies to UK-generated profits. This means domestic giants Lloyds Banking Group and NatWest Group will be hammered hardest. They generate virtually all their profits right here in the UK. When the rumours leaked, their shares immediately slid by around 2%.

Barclays is in a better position. Its US investment and consumer banking operations mean that 50% to 55% of its group earnings escape HMRC’s reach.

The clear winner is HSBC (LSE: HSBA). It generates a staggering 85% to 88% of its profits outside the UK, primarily from Asia and China. It will only pay tax on profits from its domestic arm, HSBC UK Bank.

I hold Lloyds, NatWest, and HSBC in my own portfolio, and I am certainly sweating over the first two. HSBC though? Not so much.

It faces other challenges

HSBC isn’t completely bulletproof. It carries massive risks from the shaky Chinese property market and economy, and there are political threats too as Beijing clamps down on mainland residents using Hong Kong banks. If global inflation stays hot and global economies stumble, HSBC will be right in the firing line, like every other bank.

Furthermore, its shares have enjoyed a spectacular run. They’re up 236% over five years, with dividends on top. Over the last year, they’re up 47%. The trailing price-to-earnings ratio is now 15.7x, noticeably higher than its five-year median of 10.3x. It may be due a breather.

That said, HSBC has a terrific track record of rewarding investors with aggressive share buybacks and a healthy 4% dividend yield.

All three of my banking stocks have done brilliantly, and I plan to stick with them, for life if possible. I think they’re still worth considering today, although I’d tread carefully around Lloyds and NatWest in the run-up to the Budget. Here are some other top stocks to consider right now…

Should you invest £5,000 in HSBC Holdings right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if HSBC Holdings made the list?


Harvey Jones owns shares in HSBC, Lloyds and NatWest.



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