By Charlie Conchie
Shares in UK lenders have 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 that the government would cut an existing eight per cent levy on lenders’ profits to three per cent.
Lenders pay an eight per cent surcharge on top of corporation tax to reflect the taxpayer support they received during the financial crisis.
Corporation tax is set to jump to 25 per cent from April, however, meaning that the overall tax rate on lenders would still rise to 28 per cent from the current level of 27 per cent.
London’s financial bosses had voiced concerns that hiking the keeping the elevated levy on UK lenders would dampen the appeal of the City on the international stage and choke off investment.
Shares in Britain’s biggest lender surged on the news today, with Lloyd’s Banking Group rising 3.48 per cent on the news and HSBC shares rising 1.17 per cent.
Richard Milnes, UK Banking Tax Partner at EY, said the move would “reassure” the sector.
“The UK banking sector will be reassured that there’s now clarity around the banking surcharge and that the rate will stay at the enacted three per cent when corporation tax increases to 25 per cent next April,” he added.
“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.”
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.
The post Government slashes bank surcharge in boost for the City appeared first on CityAM.
