The levy of 0.5% per transaction, along with closing a loophole that is enjoyed by some banks and hedge funds, could raise a total of £26bn over the five years of the parliament.
Shadow chancellor John McDonnell said, "It's not about punishing bankers.”
He told Sky News, "This is a small transactional tax. We are asking [for] a small contribution from the City. We bailed out the city 10 years ago when the crash came, we poured hundreds of billions of pounds into it.
"Since then £100bn has been given out in bonuses in the City. So we are asking for a small contribution...to fund our public services."
The proposal mirrors the financial transactions tax (FTT), or so-called “Robin Hood” tax, currently being prepared for introduction in 10 European countries. The FTT was a source of controversy in the UK when first proposed in 2011. Campaigners argued it was not only a money-spinner but a tool to curb the excesses of banks’ and high frequency traders. The government argued it would threaten jobs and stability in the City and beyond.
The FTT adds a charge to trades in equity and debt markets, currency transactions and derivatives in 10 eurozone countries. Britain previously launched a legal challenge against the move.
The tax was due to come into force last year but is yet to be implemented.
Labour also said it will undertake the biggest crackdown on tax avoidance “in this country’s history".
In response, Conservative financial secretary to the Treasury Jane Ellison said, "The transaction tax has been described as 'madness' by his own mayor of London because it risks economic growth and jobs.”