The bank levy was introduced in 2011. It is an annual charge on certain balance sheet liabilities and equity of banks and building societies, such as any outstanding loans or interest payments owed. All banks and building societies operating in the UK are liable to the levy, with some global groups also liable if they own UK-based subsidiaries or branches. There are two main rates – one for short-term chargeable liabilities with maturities of a year or less and one for long-term chargeable liabilities and equity. The short-term rate for 2018 is 0.16 per cent and the long-term rate is 0.08 per cent. The first £20 billion of each institution’s chargeable liabilities does not attract a bank levy charge. The bank levy rate is in the process of being cut progressively. The short-term rate will reach 0.10 per cent in January 2021. These cuts were announced in Summer Budget 2015, alongside the introduction of an 8 per cent corporation tax surcharge for banks.
In our latest forecast, we expect the bank levy to raise £2.5 billion in 2018-19. That would represent 0.3 per cent of all receipts, and is equivalent to around £90 per household and 0.1 per cent of national income.