Chancellor’s pledge to introduce new bands for the bank levy mean some big banks could end up paying hundreds of millions of pounds less in tax.

Britain’s biggest lenders are in line for hundreds of millions in tax cuts under proposed changes to the bank levy after complaining that the burden fell disproportionately on domestic institutions.

Barclays and HSBC could see their levy charges fall by a combined total of more than £300m if the Treasury goes ahead with plans to switch to a band-based system whereby the tax of an individual bank is capped at an upper limit.

A new consultation on the changes announced in last week’s Budget will begin this week, with the government suggesting a maximum charge of £375m under the draft proposals that will likely mean big UK lender paying less, while foreign lenders could see the cost of the levy rise.

However, even before the publication of the draft documents the proposals are already threatening to cause a political storm with Cathy Jamieson, Labour’s shadow financial secretary, describing the changes as a “secret tax cut” for the big banks.

“This looks like a secret tax cut for the big banks hidden in George Osborne’s Budget. The bank levy has already raised billions less than was originally promised. George Osborne must come clean and explain what impact this banding will have on revenues from the bank levy in future years,” said Ms Jamieson.

The changes will be introduced at the start of next year and will divide banks into five separate bands, with the proposed charge rising from nothing for lenders with balance sheets of less than £20bn to £375m for those with chargeable assets of between £160bn and £320bn.

Last year, Barclays paid £504m in levy charges, while HSBC paid £544m, the most of any bank. Under the draft proposals, Barclays’ bill would have been £129m lower and HSBC’s would have been £169m less.

Given the levy was set to increase by 20pc this year, the actual savings the banks could make on their levy charges might be even greater, with one banking industry tax expert estimating the combined saving could be closer to £400m.

“The issue with lowering the tax on some of the biggest banks is that the Treasury has to make up the difference somewhere else and that more than likely means raising the cost to international firms; some could see a big increase in their share of the cost,” said Wayne Weaver, UK banking tax leader at Deloitte.

Tom Aston, head of banking tax at KMPG, agreed and said the government was worried about about appearing “soft” on banks.

“The government will not want to appear soft on taxing the banking industry, but if the latest proposals are intended to please the UK banks then there is a significant burden to be redistributed onto foreign institutions,” he said.

Research by KPMG found that more than 70pc of the levy is paid by British banks. The government originally set a target of raising £2.5bn a year from the charge, but got just £1.6bn from it in the year 2012/2013 and is expected to raise £2.3bn in the current tax year, according to the Office for Budget Responsibility.

The shortfall has been caused by the rapid shrinkage of bank balance sheets against which the levy is charged. This shrinkage has forced the Treasury to increase the tax seven times since it was announced in 2010.

The Treasury held a consultation on the levy last year amid anger among banks at the repeated hikes in the rate and in December a series of changes were announced to lessen the cost to UK-based lenders.

“This new consultation looks to me like some banks are still unhappy with the burden that falls on them and have pushed for a more radical change to the way it is calculated,” said Mr Weaver.

He added: “Moving to bands will certainly help on the administrative side, though if the bands are changed frequently along with the charges then it won’t provide the predictability the industry is looking for. I think a review on, say, a three-year cycle would be sensible.”

A spokesman for the Treasury said: “The bank levy is forecast to raise £2.9bn a year from 2015-16 according to the independent OBR and the government has no plans to reduce the amount of money the levy raises.”

He added: “The consultation, announced at Budget last week, will look at ways to make the levy more predictable and sustainable moving forward. The suggested changes will not impact on the target yield from the levy, which is designed to ensure that the sector makes a fair contribution.”

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