Glossary · UK
What is Bank Surcharge?
An additional Corporation Tax rate of 3% applied to the profits of banking companies and building societies above a GBP 100 million threshold, from April 2023.
Full Definition
The Bank Surcharge is an additional Corporation Tax charge levied on the profits of banking companies and building societies in the UK. It was introduced from 1 January 2016 at a rate of 8% to ensure that banks continued to pay a higher effective tax rate than other companies following the reduction in the main Corporation Tax rate. When the main Corporation Tax rate increased to 25% from April 2023, the Bank Surcharge rate was reduced to 3% (from 8%) to limit the increase in the total tax rate on banks. The surcharge applies to profits above a GBP 100 million annual threshold. For a banking group, profits up to GBP 100 million are taxed at the main CT rate of 25%, while profits above that threshold are taxed at 28% (25% CT plus 3% surcharge). The threshold is apportioned for accounting periods of less than 12 months and is shared among group companies carrying on banking business. The surcharge applies to the same profits as Corporation Tax -- trading profits, investment income and chargeable gains of qualifying banking companies. Building societies are treated as banking companies for surcharge purposes. The Bank Levy, a separate charge on banks based on their balance sheet liabilities, continues to apply alongside the Bank Surcharge. Financial institutions should take specialist advice as the interaction of these charges with the wider Corporation Tax rules can be complex.