The UK coalition government introduced an annual levy based on banks’ balance sheets from 1 January 2011 and the rate has gradually increased each year since then. The levy 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 £20bn. 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. The rates from 1 January 2013 are 0.130 per cent for short term liabilities and 0.065 per cent for long term liabilities and these rates will increase from 1 January 2014 to 0.142 per cent and 0.071 per cent respectively. (Updated by PwC, March 22 2013)[1].