Budget: Changes for the financial services sector

By Matthew Barling and Colin Graham

The reform and reduction in the bank levy will be welcomed particularly by those banks with large overseas operations. However, the long term phased nature of the reform coupled with the new profits based 8% corporation tax surcharge means that the overall tax burden on the banking sector will go up during this Parliament. This sends very much a mixed message in terms of competitiveness of the UK as a place for carrying on banking business.

For the insurance sector, the Summer Budget will largely be viewed as mixed news by some groups. The Chancellor has shown his commitment to ensuring Britain remains competitive by announcing a cut in corporation tax to 18% by 2020. However insurance, particularly the London market, is a global business and it is important that the Chancellor ensures the UK remains the most competitive place in the G20 to do business.

However this positive feeling will be tempered by the rise in the standard rate of insurance premium tax to 9.5% from 1 November, changes to pension relief and greater regulation of claims management companies. It will be important that these new rules don’t create uncertainty and unnecessary cost for business. We are yet to see the detailed measures proposed.