Chancellor raises bank levy by £800million

The Chancellor, George Osborne, has announced that he will be increasing the amount of tax that banks operating in the UK will pay under the levy on bank profits.

Banks will now pay a further £800million in the first year of the scheme, raising the total to £2.5billion.

Although this announcement would normally be made in the budget next month, the chancellor announced it earlier so that the banks will understand the context in which they are operating before they announce bonus payments in the next few weeks.

The Chancellor had previously announced that the new bank levy would be phased in, with a lower tax applied to the first year of the scheme, but now feels that the banks are in a better position than previously believed, with a figure of around £6billion being mooted as the amount they are going to pay in bonuses this year.

The bank levy replaces the bank bonus tax that was introduced by Labour and which, as a one-off initiative, raised £2.3 billion for the treasury.

By contrast the bank levy will raise £2.5 billion through a tax on the banks before they pay bonuses, though the thorny issue of bankers bonuses will remain an issue for the government in the public’s eyes as talks to address this issue have stalled.