UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

OR

For the fiscal year endedDecember 31, 20152016

OR

For the transition period from                    to                    

OR

Date of event requiring this shell company report                    to                    

Commission file number 001-14928

Santander UK plc

(Exact name of Registrant as specified in its charter)

England

(Jurisdiction of incorporation or organization)

2 Triton Square, Regent’s Place, London NW1 3AN, England

(Address of principal executive offices)

Julian Curtis

2 Triton Square, Regent’s Place, London NW1 3AN, England

Tel +44 (0) 870 607 6000

Fax +44 (0) 20 7756 5628

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12 (g) of the Act.

None

Securities registered or to be registered pursuant to Section 15 (d) of the Act.

7.95% Term Subordinated Securities due October 26, 2029

Subordinated Guarantee by Santander UK plc (as successor in interest to Abbey National plc) of the 8.963%Non-Cumulative Perpetual Preferred Limited Partnership Interests issued by Abbey National Capital LP I

Subordinated Guarantee by Santander UK plc (as successor in interest to Abbey National plc) of the 8.963%Non-Cumulative Trust Preferred Securities issued by Abbey National Capital Trust I

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20152016 Annual Report

Santander UK plc

PART OF THE SANTANDER GROUP

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Santander UK plc

Annual Report 20152016

Important information for readers

Santander UK plc and its subsidiaries (collectively Santander UK or the Santander UK group) operate primarily in the UK, and are part of Banco Santander (comprising Banco Santander SA and its subsidiaries). Santander UK plc is regulated by the UK Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) and certain other companies within the Santander UK group are regulated by the FCA.

This Annual Report contains forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in such forward-looking statements. See ‘Forward-looking statements’Forward-looking statements on page 330.272.

None of the websites referred to in this Annual Report on Form 20-F for the year ended 31 December 2016 (the Form 20-F), including where a link is provided, nor any of the information contained on such websites is incorporated by reference in the Form 20-F.

Santander UK plc    1

Strategic report

Santander UK plc (the Company and together with its subsidiaries, Santander UK or the Santander UK group) is required to set out in this report a fair review of its business and a description of its principal risks and uncertainties, including a balanced and comprehensive analysis of the development and performance of the business in the year and of its position at the end of the year. This information can be found below and in the following sections of this Annual Report, which are incorporated into and form part of this Strategic report.

Under the UK Companies Act 2006, a safe harbour limits the liability of Directors in respect of statements in and omissions from the Directors’ Report (for which see page 193)160), the Strategic report and the Remuneration report. Under English law the Directors would be liable to the company, but not to any third party, if one or more of these reports contained errors as a result of recklessness or knowing misstatement or dishonest concealment of a material fact, but would otherwise not be liable. Pages 193160 to 196164 inclusive comprise the Directors’ Report, pages 12 to 43 inclusive comprise the Strategic report and pages 186152 to 192155 inclusive comprise the Remuneration report, each of which have been drawn up and presented in accordance with and in reliance upon English company law and the liabilities of the Directors in connection with these reports shall be subject to the limitations and restrictions provided by such law.

The Directors, in preparing this Strategic report, have complied with s414Csection 414C of the Companies Act 2006.

Chair’s statementPrincipal activities and business review

My first ten months as Chair have affirmed my view that Santander UK is true in its intent to be a bank that is Simple, Personal and Fair but is not complacent about the effort and length of the endeavour.Who we are

UK banks need to continue their transformation, focusing more on the needs of people and businesses in the real economy and regaining the trust of customers, investors, regulators, policy makers and the wider public. The UK cannot claim to be a leading global financial centre until it provides its own economy with world-class service.

Santander UK can play a key role in this transformation through its unique position as the only full-service ‘scale challenger’. We have greater reach, high street presence and brand recognition than niche players whilst our market position relative to the ‘big four’ ensures we maintain our incentive to win the loyalty of customers and challenge the incumbents’ ways of doing business. We have demonstrated this, for example, by launching innovative products such as the 1I2I3 World Current Account and our unique international trade proposition which provides the only UK bank export scheme targeted at SMEs. We have sustained our position in the highly competitive mortgage market from our building society heritage, but in other segments Santander UK is still a challenger bank. We have the need and ability to innovate and compete and that is integral to our approach in improving the way we serve our customers.

Transformation on multiple fronts

I do not underestimate the significant challenges our people and systems face in simultaneous implementation on multiple fronts. This ranges from regulatory changes to our balance sheet and operations, to ‘ring-fencing’ our business into a Retail Bank for personal and small business customers, and a unique dedicated Corporate Bank for our business customers from SMEs to the FTSE 100. It includes embedding cultural change, deepening our relationships with customers, innovating and delivering the very best digital banking services. All this needs to be done while ensuring we remain profitable in a persistent low interest rate environment, manage risk effectively in unpredictable markets and a highly uncertain world and continue to win competitive market share.

I am very confident in the ability of Nathan Bostock, our CEO, to deliver his 3-year strategy and lead this multiple transformation with his senior executives and our dedicated and committed employees. He has been left a strong legacy by Ana Botín from her time as CEO. Her continued presence on the Santander UK Board as a Banco Santander-nominated Non-Executive Director demonstrates the strength we gain from the strategic and operational resources of our shareholder.

Embedding the behaviours that underpin our culture

One of the most important programmes we initiated was defining the set of behaviours that underpins the culture we want. It has been an extraordinary task that has taken the senior executives across the country to engage directly with almost 2,000 of our people. Together, they have defined and articulated the behaviourstheyhave said embody our values of Simple, Personal and Fair. We are starting to embed these behaviours in how we operate every daya large retail and this has been a great example of the collaborative and inclusive leadership for which I commend Nathan.

Embracing digital opportunities

In the last few years, the way our customers use digital technology in their daily lives has changed at a significant pace. More than two thirds of British adults own a smartphone and use it more than any other device to access the internet. Our customers quite rightly expect to be able to deal with theircommercial bank through their channel of choice. We have looked ahead to 2025 to begin to put together a strategy, discussed regularly by the Board, which starts with a vision of enabling customers to do their banking in the way that is most convenient for them. Recent examples of our drive to provide innovative and customer-oriented solutions are our new mobile banking app, Spendlytics, our early adoption of Apple Pay and our active involvement in Banco Santander’s InnoVentures Fin-Tech fund.

Board changes

I would like to pay tribute to my predecessor Lord Burns for his strategic leadership and judgement over 14 years that saw the creation of Santander UK and its safe steerage through the financial crisis. I am personally very grateful for the enormous support and advice he has provided me during and since the period of transition. 2015 has been a year of significant transformation of the Board. Three longstanding Non-Executive Directors, José María Carballo, Rosemary Thorne and Roy Brown, retired from the Board each having completed over or close to nine years’ service. In addition, Antonio Escámez and Mike Amato stood down with effect from 31 December 2015. As José María Fuster leaves his Banco Santander executive role, he will no longer be a Banco Santander nominated Non-Executive Director in the UK as of 1 April 2016. I would like to thank the out-going Non-Executive Directors for their commitment and dedication through formative and challenging times.

I would also like to thank the two Executive Directors who left us during 2015, Steve Pateman, responsible for UK Banking and Stephen Jones, Chief Financial Officer, for their significant contribution to our successes.

Four new Independent Non-Executive Directors were appointed: Chris Jones and Genevieve Shore joined the Board in March 2015. Chris is our designated financial expert and Chair of Board Audit Committee. Ed Giera joined the Board in August 2015 and Annemarie Durbin in January 2016. Ed took over as the Chair of Board Risk Committee in October 2015 from Bruce Carnegie-Brown who I am very pleased remains on the Board as a Banco Santander nominated Non-Executive Director, following his appointment as Lead Independent Director of Banco Santander. Scott Wheway, who has been a Non-Executive Director since October 2013, was appointed as our first Senior Independent Director and is acting as Chair of the Remuneration Committee. In addition, Peter Jacksonwill join the Board (subject to regulatory approvals, as needed) from 1 April 2016 as a Banco Santander nominated Non-Executive Director when he replaces José María Fuster in his group executive function.

As a result of these changes, our Board gender diversity increased from 13% in 2014 to 31% in January 2016. The representation of Independent Non-Executive Directors (as described in ‘UK Group Framework’ on page 2)increased from 38% in 2014 to 54% in January 2016.

I believe this Board has the calibre, skills and judgement to meet our stated goal to be the best governed bankbased in the UK and a wholly owned subsidiary of the major global bank Banco Santander. Through our seamless omni-channel experience we increasingly serve our customers through digital channels, in particular mobile, supported by telephone call centres and a network of 841 branches and 67 Corporate Business Centres.

We play an important role in the UK economy. We help people finance their home and save for the future and support business growth. We employ c. 20,000 people and paid corporation tax of £507m in 2016.

What we do

We are a simple bank and create value by serving our customers with financial products and services. Most of our 14 million active UK customers are individuals but we also serve a growing number of small, medium and large companies.

Most of what we do can be described as lending money to borrowers, taking deposits from savers and providing bank accounts. We also offer a full range of investment and insurance products to households and more specialised services and products to companies.

We help our customers prosper

We create sustainable value

We protect value

We stand out from the crowd

Development and performance of our business in its ambition to be2016

Information on the best bank fordevelopment and performance of our people, customers, shareholders and communities.

Annual Report 2015

Strategic report

Corporate governance review

“The Board has been guided in its changes by a desire to improve continuously the assurance and oversight that our investors, customers and regulators rely on as well as the challenge, support and guidance management expect of us.”

Shriti Vadera

Chair

Ambition

Our ambition is to be the best governed bankbusiness in the UK that supports Santander UK’s aspiration to become the best retail and commercial bank. 2015 has been a year of significant transformation in our governance. We articulated more clearly the terms of our relationship with our parent, made a number of changes to the Board’s composition and improved our way of working as an effective governing body. The Board has been guided in its changes by a desire to improve continuously the assurance and oversight that our investors, customers and regulators rely on as well as the challenge, support and guidance management expect of us.

UK Group Framework

The first element of change has been to define clearly our responsibilities and relationship with Banco Santander, our sole shareholder, through a UK Group Framework agreed by Santander UK and Banco Santander. This provides Banco Santander with the oversight and controls they need while discharging our responsibilities in the UK in line with best practice as an independent Board. Clarity of roles and responsibilities is key to ensuring proper accountability for decisions and outcomes. The UK Group Framework therefore sets out, amongst other elements:

Board composition and skills

It is our view that 10-14 is the optimal Board size for Santander UK. Our Board is currently 13 compared to 16 during 2014. Seven, or 54%, including the current Chair are Independent compared to 38% during 2014 and four are women, improving our Board gender diversity to 31% women from 13% in 2014.

The year saw a significant change in the membership of the Board, with a number of long serving Directors stepping down, as set out in mythe ‘Income statement review’ section of the Financial review.

Our position at 31 December 2016

Information on our position at the previous page. New appointments were based on wide searches conducted by external firms andend of the year is set out in the ‘Balance sheet review’ section of the Financial review.

Customer focused on ensuring the right mix of skills and experience onring-fence model

On 22 December 2016, the Board asof Santander UK approved a wholerevised business model and critically, enablinglegal entity structure to comply with the diversity of thinking that underpinsring-fencing requirements in the Board’s ability to provide effective challengeUK. The revised model provides greater certainty for our customers while ensuring minimal disruption and oversight. Acrossa smooth transition for those customers impacted. With the Board table, we have a core of banking skills combined with recentBanking Reform Act due for implementation by 1 January 2019, and relevant financial expertise, complemented with financial markets, retail, wealth management, digital, economics and Government experience. The new INEDs have spent significant time on their induction and we have instituted regular workshops for all Directors to deepen and refresh our understanding of key business issues.

We appointed, for the first time, a Senior Independent Director in Scott Wheway who has served on the Board since October 2013. In light of the number of Board members retiring, the average tenure of Board Directors has gone from five years in 2014 to three years in 2015. We will be ensuring a phased approach to tenure going forward to allow for smooth transitions between Directors.

Board Committees

All Committees are chaired by INEDs (including myself for Board Nomination Committee) and all have a sizeable majority of INEDs. We have constituted the membership of the Committees so that all INEDs are members ofchangeable macro environment, the Board Audit, Board Risk and Board Remuneration Committees to provide efficient working and effective oversight.

We reviewed all the Terms of Reference of the Board Committees in line with best practice. Most notably we significantly enhanced the Terms of Reference of the Board Remuneration Committee to enable an active and strengthened function, reflecting the agreement in the UK Group Framework and a changed environment of executive remuneration in the financial services sector. As a result, the Committee was also renamed from Board Remuneration Oversight Committee to Board Remuneration Committee.

Board fees

We reviewed all Board and Board Committee fees with no changes made except to remove the payment of fees for Board Nomination Committee members which is increasingly the market norm; and increase the fees of Board Remuneration Committee members to bring it into line with that of Board Audit and Board Risk Committees, reflecting better its enhanced role and time commitment.

Board fees are set out on page 192 of the Directors’ Remuneration report.

Board effectiveness

Following an external board effectiveness review in 2013, we conducted an internal review to help us develop our plans for continuous improvement for the year ahead. We will conduct a full external review of board effectiveness during 2016.

The Board agreed in June 2015 a set of five strategic priorities focused on: long term strategy; regulatory trust; customer focus; embedding culture; and talent and succession planning. These are not intended to set the strategy or priorities of the business but to act as a guide to help the Board with what we need to keep front of mind in our deliberations and discussions.

How we spent our time⁽²⁾

The integrated nature of Board discussion makes it difficult to categorise how we spent our time and the resultant analysis is somewhat artificial. For instance, time spent on governance will include Board private sessions which often cover our people as their primary topic. Similarly, time spent on regulatory matters often covers topics such as certain types of risk, which would be discussed in the normal course of Board business, even if it were not a regulatory requirement. Nevertheless, it is a good discipline to understand at a general level how Board time is allocated.

In 2015, we also made the analysis of Board time more granular to assist our planning. In particular, the time the Board spends on risk and control has been separated out from other governance and audit matters. We also separated out People soconcluded that we can measurebetter serve our customers with a ‘wide’ ring-fence structure, rather than the ‘narrow’ ring-fence originally envisaged. Under this model Santander UK plc, the ring-fenced bank, will serve our retail, commercial and improvecorporate customers. This also maintains longer term flexibility and leads to lower overall cost with the time we spend on this topic givenmigration impacting fewer customers. Abbey National Treasury Services plc will no longer constitute the importance we place on deliveringnon-ring-fenced bank and its activities will be revised as part of the right culturenew ring-fencing model.

We intend to complete the implementation of our ring-fence plans in advance of the 2019 legislative deadline, subject to regulatory and behaviours.court approvals, and various other authorisations.

2    Santander UK plc

During 2015, the Board spent more than 50% of its time on business and customer priorities. This is an increase on time spent in 2014, reflecting the drive for digital transformation, the persistent low interest rateUncertain macro environment and Santander UK’s role as a scale challenger in a highly competitive market.

The Board also spent significant time on capital and regulatory matters (17%) and on risk and control (15%), reflecting the challenges faced in simultaneous implementation on multiple fronts. While some outside the sector may be surprised by the time spent on regulatory matters, I believe that this is appropriate and to be expectedrelatively stable economic backdrop we saw in the current environment, particularly consideringfirst half of 2016 became more volatile as the preparations that need to be made to deliver on ring-fencing requirements.

The Board held its strategy day offsite in July 2015 during which we consideredyear progressed with the implications of technology and digital innovation for our current business and future strategy. We also held our first Customer and Innovation Forum in November 2015 chaired by Nathan and attended by Non-Executive Director members. This forum was created to provide thought leadership and oversightoutcome of the definitionEU referendum in June leading to some short-term market variability. After this initial period, consumer confidence measures recovered and delivery of our growing innovation agenda. Both the strategy day offsite and Customer and Innovation Forum reflect greater time spent on a challenging competitive and digital environment and onesecond half of the Board’s key strategic prioritiesyear saw continued steady economic growth. While the depreciation of agreeing and guidingsterling may well have a positive effect on the long-term strategy of Santander UK.

Board future priorities

For 2016, we will continueexternal net trade contribution to workeconomic growth, it is expected to improve our effectiveness as a board in supporting and challenging the business. Our strategic priorities as stated above will not change significantly although more time will needlead to be given to implementing a Board governance structure for the holding company and Retail and Corporate banks in preparation for our ring-fenced model. We will continue to monitor the risks of an uncertain global macro-environment and multiple transformation projects, support the management in embedding the behaviours chosen by our people as best defining a culture of Simple, Personal and Fair, while ensuring the business remains true to its long-term strategy and goals through short and medium-term pressures.

Principal activities and business review

The Company and its subsidiaries (collectively, Santander UK or the Santander UK group) is a major financial services provider, offering a wide range of personal financial products and services, and is a growing participant in the corporate banking market.

The Company is authorised and regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

Economic environment

higher inflation. The UK economy has now grown for 11ended the year with 16 consecutive quarters with steadyof GDP growth expected in 2016. Labourand a stable labour market prospects are also positive, with the unemployment rate likelyat around 5% – close to fall a little further towards the pre-crisis low ofpre-recession levels 1. With inflation averaging just under 5%.

Inflation is currently around zero and is likely to remain low through 2016. This should providebelow 1% in 2016, this provided some support for household real incomes asat a time when nominal earnings growth is likely to remainremained relatively subdued. Low inflation also underpins the financial market

The consensus expectation that the low interest rate environment will continue, providing a further impetus to household real incomes.

Overall these are positive trends for our business. While2017 sees slower growth with continued low interest rates createalongside the possibility of rising unemployment. Inflation is expected to breach the Bank of England target of 2% in 2017 as the impact of rising oil prices and sterling depreciation is felt. Mortgage market lending growth ended 2016 at 3%, its strongest end to a challenging environment for income growthyear since 2008, with house prices continuing to rise, albeit at a slower pace than in the short term, they have, together with house price growth and falling unemployment, contributedprevious year 3. Following an extended period of contraction, there has been an increase in bank lending to lower arrears. In addition, our balance sheet is well positioned to benefit from interest rate rises.companies.

Development and performance of our business in 2015Demanding regulatory change agenda

Information on the development and performance of our businessRegulation in the year is set outUK remains focused on three broad objectives – making banks stronger, supporting positive customer outcomes, and encouraging greater competition. We support the objectives of UK policy makers and work hard to ensure we comply with new regulations while welcoming steps to combat customer inertia. During 2016 there were noteworthy developments on several significant issues which remain in focus for UK banks going forward. These include customer redress related to PPI, the ‘Income statement review’ sectionrequirement for large UK banks to ring-fence their retail banking operations and the regulatory requirement to build loss absorbing capacity. We have also worked with regulators throughout 2016 on a number of the Financial review.

Our position at 31 December 2015

Information ondevelopments related to payments and innovation. These are intended to make it easier for customers to access banking services. We expect our position at the end of the year is set out in the ‘Balance sheet review’ section of the Financial review.

Outlook

We believe the UK economyreturns going forward will remain supportive of our business in 2016 although our future earnings willcontinue to be impacted by increased regulatory compliance costs as well as the bank corporation tax surcharge and increasing pressure on asset margins. We are also mindful that the recent market volatility from wider macro and geopolitical factors could affect the UK banking sector.

In January 2016, we increased the monthly fee on the 1I2I3 Current Account. The impact on customer acquisition, loyalty and satisfaction will become clearer during the year ahead. Nonetheless, we believe this account will continue to offer significant value to our customers.

We will continue to work on our Banking Reform plans. We are confident that ourmore onerous taxation regime. However, as a full-service scale challenger position meanswith a strong customer focus, we remain confident that we can continue to innovate, satisfy customers’ new expectations,grow our business. We plan to further develop loyal relationships with our personal and for uscorporate customer by living up to our commitment to be Simple, Personal and Fair.

2017 outlook remains uncertain

We expect the slowdown of the UK economy, seen this year to continue as economic uncertainties prevail. We expect net interest margin to grow.remain broadly stable, predicated on interest rate not reducing further, with continued competitive pressures on asset margins as well as SVR attrition. Cost management remains a key focus as we continue to invest and grow, while capturing future operational efficiencies. We expect our net mortgage lending to be broadly in line with the market, and the decline in SVR balances to be slightly lower than the net £7bn reduction in 2016. We expect our corporate lending to be slower than in recent years, consistent with forecasted slowdown in the UK economic growth and as we actively manage exposures to certain segments in line with our proactive risk management practices.

By building upon our strong foundations, we are well positioned to succeed despite the uncertain macro environment.

Our principal risks and uncertainties

Information on our principal risks and uncertainties is set out in the Risk review by type of risk, with more detail by business segment. Our Risk factors are set out in the ‘Shareholder Information’ section.

When reading the Risk review the Risk factors and the other sections of the Annual Report, you should refer to the ‘Forward-looking statements’ section in the Shareholder information.

Annual Report 2015

Strategic report

Key performance indicators

Well executed 2013-2015 strategy

Our 2015 commitments were established at the end of 2012, when we began the transformation from a combination of three legacy building societies into a leading commercial franchise. Although we have successfully delivered on most of our 2015 commitments, we have not completed our journey to become a fully customer focused and better diversified bank.

Key performance indicators going forward

With effect from 1 January 2016, theThe directors of the Company’s immediate parent, Santander UK Group Holdings plc, manage the operations of the Santander UK Group Holdings plc group (which includes the Santander UK group) on a business division basis. From that date, keyKey performance indicators have no longer beenare not set, monitored or managed at the Santander UK group level. As a result, the Company’s Directors believe that analysis using key performance indicators for the Company is not necessary or appropriate for an understanding of the development, performance or position of the Company going forward.

Environmental matters

Company. The Company facesdevelopment performance and position of the same environmental risks as its immediate parent company,business of the Santander UK Group Holdings plc, and therefore operates environmental policiesgroup, mainly at a consolidated level, is set out in line withthe Financial Review. The key performance indicators of the Santander UK Group Holdings plc group. For moregroup can be found on the Santander UK Group Holdings plc group’s environmental risks, policiespages 12 and impact, including disclosures on CO₂ emissions, see the Santander UK Group Holdings plc 201513 of its 2016 Annual Report.Report, which does not form part of this report.

Employee matters

The Company participates in the Santander UK Group Holdings plc group’s policies for employees. For more on the Santander UK Group Holdings plc group’s employee matters, including disclosures on employee participation and diversity, see the Santander UK Group Holdings plc 2015 Annual Report.

By Order of the Board

Nathan Bostock

Director

2422 February 20162017

Santander UK plc    3

Financial review

4    Santander UK plc

Financial review

Annual Report 2015

Financial review

Income statement review

SUMMARISED CONSOLIDATED INCOME STATEMENT

2016 compared to 2015

Profit before tax was up 43% at £ 1,917m, with solid income growth, strong cost discipline and lower conduct costs. By income statement line, the movements were:

We made an additional £144m provision charge in the year, which included our best estimate of Plevin related claim costs and a £30m charge for a specific portfolio under a past business review. With the FCA consultation expected to close in the first quarter of 2017, we have assessed the adequacy of our provision and applied the principles published in the August 2016 FCA consultation paper to our current assumptions. We will continue to review our provision levels in respect of recent claims experience and once the final FCA guidance is published, and it is possible further PPI-related provisions will be required in future years.

Monthly utilisation during the year, excluding the impact of past business review activity, was slightly higher than the 2015 average and in line with our assumptions. We will continue to review our provision levels in respect of recent claims experience and once the final FCA guidance is published.

Tax on profit increased 57% to £598m with the effective tax rate up from 28% to 31%. These increases are primarily driven by the 8% bank corporation tax surcharge and higher profits, partially offset by the tax impact of lower conduct provision charges in 2016.

Santander UK plc    5

2015 compared to 2014

Profit from continuing operations before tax decreased by £54m to £1,345m in 2015 (2014: £1,399m). By income statement line, the movements were:

When assessing the adequacy of our PPI provision, we have applied the November 2015 FCA consultation paper including the Plevin case to our current assumptions. The additional £450m provision represents our best estimate of the remaining redress and costs. The additional provision is predicated on the probable two year deadline by which customers would need to make their PPI complaints and the anticipated increase in claim volumes as a result of the finite claim period.

Monthly utilisation, excluding pro-active customer contact, during 2015 was £10m per month (including related costs), against an average of £9m in 2014. While we saw a reduction in PPI redress in the first half of the year, we have seen an increase in the third quarter aligning with industry trends, with the fourth quarter remaining flat.

Other conduct provisions included £43m of additional provisions taken in the third quarter of 2015 relating to wealth and investment products. The additional provisions were taken following the agreement of the revised approach to redressing portfolio and structured investment customers with the FCA.

Regulatory costs relating to the FSCS of £76m (2014: £91m) and the UK Bank Levy of £101m (2014: £74m) were charged in the year. See Note 33 to the Consolidated Financial Statements.

The taxation charge increased by 32% to £381m (2014: £289m), primarily due to higher operating income and the disallowance of certain conduct provisions for tax purposes in 2015. This was partially offset by the reduction in the main corporation tax rate in 2015. The effective tax rate for 2015, based on profit before tax was 28.3% (2014: 20.7%).

6    Santander UK plc

2014 compared to 2013

Profit from continuing operations before tax increased by £290m to £1,399m in 2014 (2013: £1,109m). By income statement line, the movements were:

Critical factors affecting results

The preparation of our Consolidated Financial Statements requires management to make estimates and judgements that affect the reported amount of assets and liabilities at the balance sheet date and the reported amount of income and expenses during the reporting period. Management evaluates its estimates and judgements on an ongoing basis. Management bases its estimates and judgements on historical experience and other factors believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Estimates and judgements that are considered important to the portrayal of our financial condition including, where applicable, quantification of the effects of reasonably possible ranges of such estimates are set out in ‘Critical Accounting Policies and Areas of Significant Management Judgement’ in Note 1 to the Consolidated Financial Statements.

The rest of this section contains a summary of the results, and commentary thereon, by income statement line item for each segment.

Annual Report 2015

Financial review

Basis of results presentation

The segmental information in this Annual Report reflects the reporting structure in place at the reporting date in accordance with which the segmental information in Note 2 to the Consolidated Financial Statements has been presented. The Company’s board of directors (the Board) is the chief operating decision maker for Santander UK. The segmental information below is presented on the basis used by the Board to evaluate performance and allocate resources. The Board reviews discrete financial information for each segment of the business which follows our normal accounting policies and principles, including measures of operating results, assets and liabilities.

As described in Note 2 to the Consolidated Financial Statements, the internal UK transfer pricing mechanism used to calculate the cost and risks associated with funding and liquidity in each business segment was refined in the fourth quarter of 2015 for Retail Banking and Corporate Centre to reflect the current market environment and rates. The segmental analyses for Retail Banking and Corporate Centre have been adjusted to reflect these changes for prior years.

PROFIT BEFORE TAX BY SEGMENT

8  Santander UK plc    7

RETAIL BANKING

Retail Banking offers a wide range of products and financial services to individuals and small businesses (with less than two directors, owners or partners), through a network of branches and ATMs, as well as through telephony, digital, mobile and intermediary channels. Retail Banking also includesserves business customers with an annual turnover of up to £6.5m via business banking as well as Santander Consumer Finance, predominantly a vehicle finance business. Its main products are residential mortgage loans, savings and current accounts, credit cards (excluding the co-branded cards business) and personal loans as well as insurance policies.

Summarised income statement

20152016 compared to 20142015

Profit from continuing operations before tax decreasedincreased by £252m£678m to £920m£1,575m in 2015 (2014: £1,172m)2016 (2015: £897m). By income statement line, the movements were:

We made an additional £144m provision charge in the year, which included our best estimate of Plevin related claim costs and a £30m charge for a specific portfolio under a past business review. With the FCA consultation expected to close in the first quarter of 2017, we have assessed the adequacy of our provision and applied the principles published in the August 2016 FCA consultation paper to our current assumptions. We will continue to review our provision levels in respect of recent claims experience and once the final FCA guidance is published, and it is possible further PPI-related provisions will be required in future years.

Monthly utilisation during the year, excluding the impact of past business review activity, was slightly higher than the 2015 average and in line with our assumptions. We will continue to review our provision levels in respect of recent claims experience and once the final FCA guidance is published.

2015 compared to 2014

Profit before tax decreased by £262m to £897m in 2015 (2014: £1,159m). By income statement line, the movements were:

8    Santander UK plc

Other conduct provisions included £43m of additional provisions taken in the third quarter of 2015 relating to wealth and investment products. The additional provisions were taken following the agreement of the revised approach to redressing portfolio and structured investment customers with the FCA.

Regulatory costs relating to the FSCS of £76m (2014: £91m) and the UK Bank Levy of £66m (2014: £50m) were charged in the year. See Note 33 to the Consolidated Financial Statements.

Balances

2016 compared to 2015

2015 compared to 2014

Annual Report 2015Santander UK plc    9

Financial review

2014Business volumes

2016 compared to 20132015

Profit from continuing operationsbefore tax increasedWe continued to build our BTL book by £245m to £1,172mfocusing on non-professional landlords, as this segment is closely aligned with residential mortgages and accounts for the majority of the volume in 2014 (2013: £927m)the BTL market. In 2016, we completed 12,400 BTL mortgages, representing 9% of the value of our new business flow, at an average LTV of 67%. By income statementIn line with the movements were:market, we saw a spike in BTL mortgages ahead of the April 2016 stamp duty increase. BTL net lending was lower in the quarters following the stamp duty increase, but remained positive.

2015 compared to 2014

We continued to build our BTL book, which represented 3% of our total mortgage book, focusing on non-professional landlords, as this segment is more closely aligned with residential mortgages, and also accounts for the majority of the BTL market. In 2015, we completed 12,700 BTL mortgages, representing 10% of new business flow, at an average LTV of 70%.

Business development in 2016

Balances and ratios

10    Santander UK plc

COMMERCIAL BANKING

Commercial Banking offers a wide range of products and financial services to customers through a network of regional Corporate Business Centres (CBCs) and through telephony and digital channels. The management of our customers is organised across two relationship teams - the Regional Corporate Bank (RCB) that covers trading businesses with annual turnover from £6.5m to £500m and Specialist Sector Groups (SSG) that cover real estate, housing finance, education, healthcare, and hotels. Commercial Banking products and services include loans, bank accounts, deposits, treasury services, invoice discounting, cash transmission, trade finance and asset finance.

Summarised income statement

2016 compared to 2015

Profit before tax increased by £22m to £219m in 2016 (2015: £197m). By income statement line, the movements were:

2015 compared to 2014

Profit before tax increased by £123m to £197m in 2015 (2014: £74m). By income statement line, the movements were:

Santander UK plc    11

Balances

2016 compared to 2015

2015 compared to 2014

2014Business volumes

2016 compared to 20132015

Annual Report 2015

Financial review

Business volumes

2015 compared to 2014

2014 compared to 2013

12    Santander UK plc

Business development in 2015

Annual Report 2015

Financial review

COMMERCIAL BANKING

Commercial Banking offers a wide range of products and financial services to customers through a network of regional Corporate Business Centres (CBCs) and through telephony and digital channels. The management of our customers is organised according to their annual turnover (£250,000 to £50m for SMEs, and £50m to £500m for mid corporates), enabling us to offer a differentiated service to SMEs and mid corporate customers. Commercial Banking products and services include loans, bank accounts, deposits, treasury services, invoice discounting, cash transmission, trade finance and asset finance. Commercial Banking also includes specialist commercial real estate and Social Housing lending businesses.

Summarised income statement

2015 compared to 2014

Profit from continuing operations before tax increased by £113m to £174m in 2015 (2014: £61m). By income statement line, the movements were:

2014 compared to 2013

Profit from continuing operations before tax increased by £68m to £61m in 2014 (2013: loss of £7m). By income statement line, the movements were:

14  Santander UK plc

Balances and ratiosBusiness development