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 Summer Budget 2015, the government announced it would cut a punitive bank tax and reduce its impact on global lenders in an attempt to keep HSBC and Standard Chartered from moving abroad, but damped cheer with a new surcharge on British banks.
Chancellor George Osborne said in his Budget that the £3bn bank levy would be gradually reduced over the next six years and stop applying to worldwide assets from 2021.
The levy changes are expected to appease HSBC and StanChart in particular, after both threatened to move their headquarters abroad partly as a result of the bank tax. But, at the same time as alleviating the levy, the government will introduce a new 8 per cent surcharge on bank profits from the start of next year to cushion any fall in revenue to the exchequer.