£40 billion extra tax bill for banks will harm lending

Britain’s banks will have been hit by an extra £40 billion tax bill by 2020.

This bill will harm their ability to lend to businesses and create new jobs, the British Bankers Association (BBA) said on 16 July. In July, the Chancellor, George Osborne, announced that the government would replace a levy on bank balance sheets with a surcharge on profits, but the two schemes will run together, placing an additional burden on lenders.

The new surcharge will tax banks 8% on their profits from next year and is the fifth new bank tax introduced in the past five years.

The bank levy was introduced in 2011 in response to the financial crisis of 2007-2009. The Chancellor has the tricky task of trying to ensure London remains an attractive place for banks to be based, while also satisfying public demand that the banks pay for the costs of the crisis. The BBA is concerned that this extra tax on top of the tens of billions of other taxes that banks pay will make it harder for banks to lend to businesses and create new jobs.