The Chancellor has announced today an increase in the rate of the bank levy to be charged in 2011. This change will increase the revenue from the levy in 2011 by £800m to £2.5 billion.
The Government initially announced that a reduced rate of 0.05 per cent would apply in 2011, recognising the uncertain market conditions prevailing at the time. The Government no longer considers this necessary. Therefore, from 1 March the rate of the levy will be 0.1 per cent for 2 months, to offset the lower rate of 0.05 per cent charged in January and February, before moving to 0.075 per cent.
The Bank of England recently noted that the near-term outlook and resilience of the UK banking sector has improved (Financial Stability Report, Bank of England, 17 December 2010). Markets also now have certainty over the timing and direction of regulatory change, with the Basel III regulatory reforms not being introduced until 2013 at the earliest and including extended transition periods.
This increase in the rate of the levy will mean that it raises £2.5 billion in 2011, the same as the target revenue for future years. Previously the 2011 yield was forecast to be £1.7 billion.
As a result of this increase in the rate of the levy, the forecast revenue raised from the levy has been revised for 2011.
Calendar year 2011 2012 2013 2014
£bn 2.5 2.5 2.6 2.6
Notes for Editors
1. Because the tax is paid in arrears, the tax year receipts profile is as follows:
Fiscal year (£bn) 2011/12 2012/13 2013/14 2014/15
1.9 2.5 2.6 2.6
2. The rates for the two-month period 1 March 2011 to 30 April 2011 will be 0.1 per cent for short-term chargeable liabilities and 0.05 per cent for long-term chargeable equity and liabilities. The rates applicable from 1 May 2011 and for the rest of calendar year will be 0.075 per cent for short-term chargeable liabilities and 0.0375 per cent for long-term chargeable equity and liabilities (the full Bank Levy rates applicable for the calendar years 2012 onwards).
3. Therefore, the rates for the calendar year 2011 will be:
· 01 January 2011 – 28 February 2011
0.05 per cent for short-term chargeable liabilities and 0.025 per cent for long-term chargeable equity and liabilities
· 01 March 2011 – 30 April 2011
0.1 per cent for short-term chargeable liabilities and 0.05 per cent for long-term chargeable equity and liabilities
· 01 May 2011 – 31 December 2011
0.075 per cent for short-term chargeable liabilities and 0.0375 per cent for long-term chargeable equity and liabilities
4. The rates for 2012 onwards will continue to be those set out in the draft Finance Bill clauses published on 9 December 2010.
Notes to editors
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