Bank surcharge rise in the 2026 Budget: will it affect small business borrowing?

The bank surcharge rise announced in the Autumn Budget 2026 is a tax on banks, but small businesses could still feel its effects through the cost and availability of credit. Chancellor John Healey confirmed that banks will pay an extra 3% surcharge from January 2027. This could have a knock-on effect for small and medium-sized enterprises (SMEs), with banks potentially passing on the additional cost through higher rates, stricter lending criteria or less appetite to lend. In this article, we explain what the bank surcharge is, what has changed, how it could filter through to small business borrowing, and why the timing of the rise matters.

What did the Autumn Budget 2026 announce for banks?

The bank surcharge is an additional tax that banks pay on their profits, on top of the corporation tax that every company pays. In the Autumn Budget 2026, the chancellor announced that the surcharge will rise by 3%, taking it to 6% on top of the 25% corporation tax rate. The increase is temporary. It applies between 1 January 2027 and 31 March 2028, a period of 15 months, and the government has said it will not be extended. The rise is expected to raise around £1.5bn, which will help fund support with household energy bills, including the £100 Household Energy Payment and the extended cut to VAT on electricity.

The rise was smaller than the 5% to 8% increase some had expected, and bank shares rose after the announcement.

How could the bank surcharge affect small business borrowing?

The surcharge is aimed at banks, not small businesses. But when a bank's costs go up, that pressure can show up elsewhere, including in the finance it offers to business customers.

Nick Richardson, Head of Funding at Capitalise, said:

"The surcharge is aimed at banks, but small businesses shouldn't assume they won't feel it. When a bank's costs go up, that pressure has to go somewhere. It could show up in slightly higher rates, stricter lending criteria or less appetite to lend to smaller firms that are seen as riskier."

In practice, this could affect small businesses in three ways:

• Interest rates on loans and other borrowing could rise slightly, which would make repayments more expensive.

• Lending criteria could become stricter, making it harder for some businesses to meet the bar a bank sets for approving an application.

• Banks could become less willing to lend to smaller firms that they see as a higher risk.

None of these outcomes are guaranteed, and each bank will make its own decisions. The concern is that a tax aimed at banks may become a hidden cost for the businesses that rely on them for credit.

Why does the timing of the bank surcharge matter?

The surcharge starts in January 2027, which is when many businesses reach their annual cash flow low point after Christmas. It then runs into a year in which economic growth is forecast to slow. The Office for Budget Responsibility (OBR), which produces the official economic forecasts used in the Budget, expects inflation of 3.4% in 2027, with growth slowing to 1%. These are conditions in which lenders often become more cautious.

The surcharge is also followed closely by other changes announced in the Budget. Many of those measures begin in April 2027, including the 3.9% rise in the National Living Wage to £13.21 an hour. The start of the year is exactly when owners are most likely to need a loan, an overdraft or invoice finance to keep things moving, so any tightening in bank lending could be felt when finance matters most. The expanded Growth Guarantee Scheme, which covers loans, overdrafts and invoice finance, gives lenders a 70% government backed guarantee that can help businesses access finance they might otherwise struggle to secure.

Are all lenders affected by the bank surcharge in the same way?

The good news is that small businesses aren't limited to their high street bank. The UK SME lending market includes a wide range of lenders, including specialist and alternative lenders that may not be affected by the surcharge in the same way as banks. In his wider response to the Budget, Nick Richardson also pointed to more government backed lending as one of the measures that will help small businesses, alongside lower business rates bills and cheaper fuel.

What else did the Autumn Budget 2026 announce for businesses?

The bank surcharge is one of several Budget measures that will shape small business cash flow in 2027. Some will ease day to day costs, while others will add to them:

• From 1 April 2027, the 100% business rates relief threshold for eligible retail, hospitality and leisure properties in England rises from £12,000 to £18,000 rateable value, with 70,000 businesses expected to pay no rates.

• The 5p fuel duty cut has been extended until 1 July 2027.

• The cut to VAT on electricity bills, from 5% to zero, has been extended until July 2027.

• The National Living Wage rises by 3.9% to £13.21 an hour from April 2027, which will increase wage bills for many employers.

• The main rate first year allowance rises from 40% to 50% for qualifying spending from 1 January 2027.

Our Autumn Budget 2026 overview covers the full set of announcements.

For comparison with previous years, you can also read our coverage of the Autumn Budget 2025, and the Autumn Budget 2024.

Compare the market before you commit to business finance

If you're looking for funding, it's worth comparing offers from different lenders before committing, rather than accepting the first one you receive. This gives you a better chance of finding an option that suits your business. It's also worth exploring your options before you urgently need finance, so you're better prepared when the time comes.Capitalise gives you access to a panel of 130+ lenders, including specialist and alternative lenders, so you can see the range of options available to your business.