Shares in several major banks rose after it became clear that the increase would be temporary and limited to six per cent.
Standard Chartered, NatWest and Lloyds Banking Group were among the strongest performers on the FTSE 100, with each rising by more than two per cent.
Mark Preskett, senior portfolio manager at Morningstar Wealth, said: “One surprise was the lower-than-expected 3% increase in the bank surcharge, which was much less aggressive than markets had feared, and today’s rally in UK banking shares suggests investors had been positioned for a full reversal of the previous cut.”
Banks had strongly opposed a substantial tax increase, warning that it could discourage investment in Britain and reduce the amount of money available for lending.
The change will not automatically push up mortgage rates, banking fees or borrowing costs. However, critics warn that lenders could respond by increasing charges, restricting credit or making some products less competitive.