Government slashes bank surcharge in boost for the City
Shares in UK lenders jumped today as the government confirmed it would slash a surcharge on bank profits to three per cent, in a bid to keep the UK’s finance industry internationally competitive.
In the Autumn statement, chancellor Jeremy Hunt confirmed the government would cut an existing eight per cent levy on lenders’ profits to three per cent.
The move comes after London’s financial bosses had voiced concerns that keeping the elevated levy on UK lenders would dampen the appeal of the City on the international stage and choke off investment.
However, corporation tax is set to jump to 25 per cent from April, meaning that the overall tax rate on lenders will rise to 28 per cent from the current level of 27 per cent.
Shares in Britain’s biggest lenders surged on the news today, with Lloyd’s Banking Group rising beyond three per cent, Natwest closing the day up nearly 2.5 per cent and Barclays rising over 1.5 per cent.
Richard Milnes, UK Banking Tax Partner at EY, said the move would “reassure” the sector.
“The sector will be particularly relieved there won’t be a further tax burden placed on it which could have detrimental effects to UK banking competitiveness on the global stage,” he said.
The move came as Jeremy Hunt announced a package of tax hikes and real term spending cuts to plug a near £55bn hole in the public finances.