Following the Chancellor’s budget yesterday afternoon, the British Bankers Association has said the UK’s banks will not end up paying higher taxes; due to the government’s planned bank levy hike being offset by the drop in corporation tax.

During the budget speech, George Osborne announced that he was planning to increase the rate of the bank levy from 0.088 percent to 0.105 percent from the start of next year; however he also announced that corporation tax will be cut.

The government is looking to raise £2.5 billion a year from the bank levy, which was introduced last year in a bid to encourage banks to reduce short-term funding in an effort to avoid a repeat of the 2008 / 2009 financial crisis.

Chief Executive of the British Bankers Association, Angela Knight, said following the announcement by the Chancellor: “The government has previously said that it both wants the bank levy to raise a specific amount – two point five billion pounds - and that any reduction in corporation tax will be offset by an increase in the levy.

“The corporation tax cut would reduce the amount raised, so as before the percentage has been raised to correct this. The end result is that the banks pay the same.”

It is the fourth time since the controversial tax was announced that Britain’s banks have had the levy on their balance sheets increased.