An annual levy based on banks’ balance sheets that applies to large UK banking groups and overseas banking groups carrying on business in the UK. This levy is based on total liabilities of banks (i.e. both short and long term liabilities).
Banking institutions and groups are only liable to pay the levy where their relevant aggregate liabilities (exclusions include Tier 1 capital, insured retail deposits, repos secured on sovereign debts and policyholder liabilities of retail insurance businesses within banking groups) exceed £20 billion. The levy is not deductible for corporation tax purposes. The rate of the bank levy is lower for long term liabilities than for short term liabilities. .
In the UK Budget 2015 announcement, the chancellor George Osborne lifted the levy from 0.156 per cent of banks’ liabilities to 0.21 per cent, which he said would raise an extra £900m a year.
He said a recovery in banks’ profitability since the crisis meant they could make a “bigger contribution to the repair of our public finances” as he announced a more than one-third increase in the bank levy.
The move that is likely to hit HSBC bank the hardest after it was heavily criticised in 2015 over the tax evasion scandal at its Swiss private bank.