Bonus tax could rake in £2.5bn

The government could be in line for a £2.5bn boost from its windfall bank bonus tax, with many banks opting to take a one-year hit on the chin rather than cutting bonus pots.

Fears that top staff could flee overseas if their bonuses are cut has forced many banks to accept that there little wriggle room over chancellor Alistair Darling’s one-off 50% tax on bonus payments over £25,000.

PricewaterhouseCoopers reward partner Jon Terry told the Daily Mail that the Treasury may rake in far more than the forecast £550m, a figure that assumes many banks would slash bonuses. The figure could instead rise to as much as £2.5bn, he argues.

'I have not had indications that big banking organisations are going to substantially reduce their bonus pools, for one good reason, said Terry. 'They are operating in an international market.'