Bank levy hike offset by corporation tax cut - BBA

By @ibtimes on

Banks will not end up paying higher taxes overall as a result of Wednesday's Budget, as the government's planned hike to the bank levy will be offset by a cut in corporation tax, the British Bankers' Association (BBA) said.

Chancellor George Osborne said in his Budget speech on Wednesday that he would increase the rate of the bank levy to 0.105 percent from 0.088 percent from next January, although corporation tax will be cut.

The government has previously said that it both wants the bank levy to raise a specific amount - 2.5 billion pounds ($3.96 billion) - and that any reduction in corporation tax will be offset by an increase in the levy, said BBA Chief Executive Angela Knight.

The corporation tax cut would reduce the amount raised, so as before the percentage has been raised to correct this. The end result is that the banks pay the same, she added.

Britain's main banks are Barclays , HSBC <0005.HK>, and part-nationalised lenders Royal Bank of Scotland and Lloyds .

Santander UK also has a large UK retail banking presence, while Asian-focused bank Standard Chartered <2888.HK> has headquarters in the UK.

It shouldn't impact on the banks' earnings but it does show that there is still political uncertainty over the banks, said Shore Capital analyst Gary Greenwood, who added that HSBC, Barclays and RBS were most likely to be affected by the move.

(Reporting by Sudip Kar-Gupta; Editing by Clara Ferreira-Marques)

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