Revolut, Monzo and Shawbrook are among a raft of challenger banks calling for John Healey to raise the threshold at which UK lenders are hit with an additional tax grab.

The group – which also includes Investec, Aldemore and OSB – have written to the Chancellor ahead of the Budget in a bid to remove the threat of a punishing tax raid should their profits rise.

In a letter seen by City AM, the cohort said it recognised the “fiscal pressures facing the government” but warned any increase in the rate of the sector-specific surcharge would have a “significantly negative and disproportionate impact on mid-tier and specialist banks and harm investor sentiment”.

The UK banking surcharge currently sits at three per cent, taking lenders’ overall corporation tax rate to 28 per cent. Profits of up to £100m are exempt from the surcharge, but the group is calling for the allowance to be hiked to £500m.

“We believe the current design of the surcharge is disproportionate relative to the systemic risk posed by mid-tier and specialist banks,” the lenders wrote.

They also argued a strong mid-tier and specialist banking sector can make an “important contribution to the future of growth and prosperity of the UK economy overall”.

Challenger banks unite with demand to Healey

Analysis by the group projects the change would cost the Treasury £39m but keep surcharge tax revenues “significantly above 2025 levels under all scenarios”.

Top executives from firms signed the letter, which was first reported by Sky News, including Revolut UK’s chief Francesca Carlesi and Monzo’s Diana Layfield. Marcelino Castrillo, the boss of Shawbrook, and Paragon chief exectuive Nigel Terrington also signed the letter.

The group said they account for 60 per cent of UK lending to small- and medium-sized businesses, which underlines their “central role in financing the everyday economy”.

The calls for relief come as sector opponents ramp up lobbying efforts for Healey to target banks as he seeks to raise cash for the public purseat the Budget. Activists at Positive Money have suggested a windfall tax could raise £19bn from the big four alone. 

Banking industry body UK Finance has also written to Healey with a warning against any tax rises on the sector.

In a letter seen by City AM the industry body’s boss David Postings said: “Banking reaches every part of the economy and every region of the country, providing credit to households and SMEs, supporting investment, and acting as the UK’s gateway to global markets,” he wrote.

He added: “The debate needs to recognise both the significant tax contribution already made and the wider economic importance of sustainable profitability.”