What is the bank levy?

The bank levy is a UK tax on the balance sheets of large banks, charged on their liabilities rather than their profits. It was introduced in 2011 after the financial crisis. In 2026/27 the rate is 0.1% on short-term liabilities and 0.05% on long-term liabilities and equity.

The levy was designed to encourage banks to rely less on risky short-term borrowing, which helped cause the 2008 crash. That is why short-term liabilities are charged at twice the rate of long-term funding. Only banks and building societies with relevant liabilities above £20 billion pay. It applies to UK banks and building societies, and to the UK operations of foreign banks.

The rate peaked at 0.21% in 2015. It was then cut in stages, and from 2021 it applied only to UK balance sheets, not global ones. Banks also pay a 3% corporation tax surcharge on profits above £100 million, on top of the main 25% corporation tax rate. The changes reflected concerns that the levy made the UK less attractive as a base for international banks.

Supporters say banks benefit from an implicit state guarantee, so they should pay extra. Critics in the industry say UK banks face higher taxes than rivals in other financial centres, which could push business abroad. Some politicians have called for a new windfall tax on banks because of profits from higher interest rates.

Who it affects: Large banks' UK balance sheets