The UK’s FCA has hinted at potential reduction in the fees it charges financial firms under its direct supervision for the current financial year ending in April 2026.

It follows the publication of rates proposals for fees and levies for the financial year 2025/206, giving a measure of the watchdog’s operational expenses and the amount it expects to earn from imposing fines and penalties on firms.

The regulator has confirmed its annual funding requirement for the financial year 2025/2026 is £783m (around $1 billion). The amount is almost entirely earned from the fee the FCA charges firms.

“This is made up of the baseline cost of our ongoing regulatory activities (ORA) and our exceptional projects,” the FCA has said.

Income prediction

At the same time, the FCA has predicted the amount it will collect from imposing fines and penalties on firms who violated regulatory requirements during the financial year 2024/2025 will be twice the amount it earned in the previous financial year.

That amount, for the 2024/2025 cycle, is expected to be a record £70.5m ($91.02m). The FCA aims to keep that amount instead of sharing it with the Treasury, the FT has reported.

The way it works is that the watchdog deducts the amount it earns from fines and penalties from the net figure of its expenditure for the upcoming financial year.

In this case, the £70.5m earned from fines will be deducted from the total expenditure of £783m. This brings down the amount the FCA will need for expenses in the current year. And because expenses will decrease, the regulator is then able to give a rebate to firms on the fee that they have paid. For this financial year it is expected that the fees will decrease by 1%.

Significance

Despite being a minimal figure, it is significant because it shows the first reduction in fee firms pay to the FCA in more than a decade.

According to figures provided by the FCA, the previous 12 years have seen a continuous pattern of increase in annual fee charged by the FCA. In 2023, the total amount the regulator collected from fees was around £400m ($516m). That figure has steadily gone above £600m ($774m) in 2025.

The announcement comes at a time the FCA is facing increasing pressure and criticism, both from the government as well as the business lobby, to cut regulation and support growth.

Rob Mason, director of regulatory intelligence at Global Relay, suspects the reduction in fee is an effort by the FCA to win some credit from the government at a time when it desperately needs it.

“While not Government funded, they may see this as a (modest!) effort to help the UK economy generally,” he added.

Some of the FCA’s notable expenses include investment in AI to speed up application and data submission, reviews into the UK’s infamous car finance scandal, and developing a regulatory framework for digital assets such as crypto, the FT has reported.