THE INCREASE in the banking levy will mean that banks don’t benefit from the additional cut in corporation tax announced in the Budget.
To ensure the bank levy raises at least £2.5bn each year it will increase to 0.105 per cent from 1 January 2013, Chancellor George Osborne announced in his Budget statement earlier on Wednesday.
Overall the increase in the bank levy is expected to raise about £885m by 2014-15, the Treasury said. The cut in corporation tax by an additional one per cent from April to 24% and to 22% by 2014-15 will cost the government about £1.9bn.
The cuts to corporation tax are part of a long-term plan by the government to make the UK more attractive to business.
Osborne said that the tax cuts will mean that the UK has lowest main corporation tax rate in the G7 group of leading economies and the fourth lowest in the G20.
The Office for Budget Responsibility has estimated that the reductions in corporation tax will increase business investment by around one per cent, or by £3.4 billion between now and 2016, the Treasury said.
Accountants welcomed the additional cut in corporation tax.
Kevin Hindley, managing director, Alvarez & Marsal Tax and UK, said: “The Chancellor has played it smart with his plan to cut corporation tax to 22% by 2014. With an increased reduction to 24% this year, at a stroke he has made the UK a more attractive proposition for international business.”
Andrew Sentance, senior economic adviser to PwC, said that accelerating corporation tax cuts would help make the UK a more attractive place to do business and generate wealth.