Autumn Budget 2021: Tax saving for Britain's big banks as surcharge cut

Britain’s banks are set to save some £4 billion in taxes over five years from a cut to the banking surcharge in April 2023, according to the Budget.

Chancellor of the Exchequer Rishi Sunak leaving 11 Downing Street before delivering his Budget to the House of Commons. Picture: Jacob King/PA Wire

A surcharge of 8 per cent was cut to 3 per cent by the Chancellor to "maintain the competitiveness of our financial services".

As a result, the amount paid by banks will fall by £220 million next year, £830m in 2023/24; £975m in 2024/25; £995m in 2025/26 and £1.02 billion in 2026/27, the Budget Red Book states.

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The financial sector has been lobbying hard for a cut to the tax, warning that the tax on institutions would leave them uncompetitive with international rivals, particularly in the US.

Sunak had previously announced plans for a review of the tax in light of the rising corporation tax rate.

The Chancellor added: "Small challenger banks are improving banking competition which is good for the sector and good for consumers, so to help them I will also raise the annual allowance to £100m."

David Postings, chief executive of UK Finance, said: “The banking and finance sector makes a significant contribution to the UK public finances and we welcome the Chancellor’s announcement that the bank corporation tax surcharge will be reduced to partially offset the planned increase in corporation tax.

“This move recognises the importance to the UK of an internationally competitive sector which supports growth, jobs and innovation across the UK. At the same time, the increase in the bank surcharge annual allowance to £100m will also help to support healthy competition in the sector.”

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