UK bank shares rose after reports that a planned increase in the bank surcharge would be smaller than previously feared. According to Sina Finance, Chancellor John Healey is expected to raise the surcharge in his first budget while balancing revenue needs and relief for voters with the competitiveness of the City of London.

Sources familiar with the matter said the surcharge would not return to its pre-2023 rate of 8% and that the increase would be temporary. The current rate is 3%, on top of the 25% corporation tax rate. The sources requested anonymity because the budget details have not been announced.

NatWest Group rose as much as 2.8%, Barclays gained 2.7%, and Lloyds Banking Group advanced 2.5% after the reports emerged.

The tax increase is among the key measures in Healey’s budget, which he is due to announce on Wednesday. He is seeking funding for measures to provide relief to voters, including heating-bill rebates and a freeze on fuel duty, while keeping public finances under control.

The 3% surcharge generated £1.2 billion for the U.K. Treasury in fiscal year 2025-26. Each percentage-point increase is estimated to raise about £400 million in additional revenue annually.

The banking industry has criticized Healey’s plan. It previously warned that raising the surcharge to 8% could reduce U.K. economic output by £6 billion over the next five years, with areas outside London facing the greatest impact. David Postings, chief executive of UK Finance, said in a letter to Healey that an 8% rate could reduce lending by about £10 billion by 2029 and weaken investment in the U.K.