The British government has upped the rate of its planned tax on Britain's banks, draft legislation revealed today.
The UK Treasury outlined in today's draft Finance Bill 2011 that it will increase the rate from an initially proposed 0.04% to 0.05% in its first year from January 1 2011 and up from 0.07% to 0.075% in subsequent years.
The bank levy, which will apply to the global balance sheets of UK banks and the British operations of foreign firms, is designed to repair some of the damage caused by banks in the financial crisis.
A consultation paper on the proposed bank tax also confirmed lenders with a balance sheet of less than £20 billion will be exempt from the tax. It is expected to raise £2.6 billion a year by the end of 2012.
The levy will replace the previous Labour government's one-off bonus tax introduced earlier this year, which charged 50% on all windfalls above £25,000 - raising over £2 billion.
The draft legislation said the Treasury would have the power to offer tax relief to those banks that faced double taxation, because they operate in other countries where the levy applies.
But a spokesman for the British Bankers' Association said: 'We remain very concerned about the effect of the bank levy on the international competitiveness of the UK.'
