Chancellor of the Exchequer Alistair Darling has announced that bankers’ bonuses will be subject to a one-off ‘super-tax’ in his pre-budget report.
The 50% levy will be payable on individual discretionary bonuses of £25,000 or more.
Crucially, the super-tax will be paid by the banks choosing to award high bonus payments, rather than by the employees in receipt of them.
The decision to structure the tax in this way has been seen as an attempt to deter banks from making large bonus payments in the first place – particularly in light of the extensive taxpayer support many big-name banks have relied upon in 2009.
‘Unavoidable’ tax on bank bonuses
Bankers who do receive bonuses will have to pay income tax on these extra payments as usual.
Mr Darling said that measures to prevent banks circumventing the super-tax would be introduced immediately, and that the extra revenue it might raise will be used to combat unemployment.
The super-tax is set to apply until 5 April 2010, but the Treasury says it may be extended beyond this date until the relevant provisions of the Financial Services Bill come into force.
Britain Needs Better Banks
The Chancellor’s decision to tax bankers’ bonuses has been criticised by some commentators as a political move, rather than an economic one. However, it may well prove popular with the public.
Which? is working to demand root and branch reform of the British banking system through a special campaign, Britain Needs Better Banks. Thousands of people have already signed up to support us in demanding positive action on behalf of UK consumers.
Don’t forget that if you’re dissatisfied with your bank, it’s simple to switch your account to another provider. Check the Which? current accounts review for details of which bank will suit your needs best, and read our How to switch your current account guide for information on how the switching process works.
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