The credit rating agency said the decision to increase the Bank Corporation Tax Surcharge from 3% to 6% takes the combined tax rate on bank profits to 31%, up from 28%. The agency described it as a “meaningful shift” in the operating environment for UK lenders.

The temporary measure will begin in January and run for 15 months.

DBRS said the change will reduce post-tax earnings and internal capital generation, but concluded the overall impact is likely “to be manageable given the industry’s strong profitability, resilient asset quality and robust capital positions.”

It added that the increase comes amid expectations of higher UK interest rates, creating extra pressure on earnings “while testing banks’ ability to maintain lending growth, shareholder returns and capital strength.”

The agency said the higher tax could reinforce banks’ focus on cost efficiency and lending discipline, but it did not “expect material changes to lending or shareholder distributions.”

Maria Rivas, senior vice president, sector lead, European Financial Institution Ratings, said: “The increase in the Bank Corporation Tax Surcharge is credit negative as it will weigh on earnings and reduce internal capital generation.

“However, UK banks are entering this period from a position of considerable strength, supported by robust profitability, sound asset quality and solid capital buffers. While domestic lenders such as Lloyds Banking Group, NatWest Group, Nationwide Building Society and Santander UK are likely to feel the greatest impact because of their UK-focused earnings exposure, we expect the overall effect on lending activity, capital positions and shareholder distributions to remain modest.

“The higher tax burden may reinforce cost-efficiency initiatives, digitalisation efforts and disciplined lending practices, but we do not expect it to materially alter the strategic direction of the sector.”