The banking industry has criticised chancellor George Osborne’s budget for imposing a higher levy on the industry.
 
While the budget cut the UK’s level of corporation tax by 2 per cent, the chancellor plans to adjust the bank levy rate next year to offset its effect and ensure it will not represent a net tax cut for banks.
 
Angela Knight, chief executive of the British Bankers Association (BBA), complained that the levy made banks operating in the UK less competitive.
 
‘While corporation tax is paid on profits, the bank levy represents an additional fixed cost for larger banks operating in the UK,’ she said. ‘It also controversially can include the business that banks are doing outside the UK.
 
‘Without satisfactory double taxation arrangements in place, this is putting banks operating in the UK at a long term disadvantage - both internationally, as they compete against banks not paying such a levy, and domestically, as they compete with other sectors of the financial services industry.’
 
‘This change is not as straightforward as it first appears. Banks like other businesses want a predictable tax regime so they can plan their business accordingly.’
 
The rate of the bank levy, which has already moved from its original level of 0.05 per cent, to 0.1 per cent and most recently up to 0.075 per cent, will increase to 0.078 per cent from 1 January next year.
 
This year’s contribution to the exchequer form the levy will amount to around £2.5 billion, which the Chancellor said will in part be used to finance the new first-time buyers shared-equity scheme.