To ask Her Majesty’s Government whether they plan to prevent banks paying the new tax on bonuses instead of the bankers concerned. [HL1256]

The bank payroll tax is not payable by bank employees on their incomes. Banks awarding discretionary bonuses above £25,000 to employees and executives in the period from the Pre-Budget Report to 5 April 2010 will pay an additional bank payroll tax of 50 per cent on the excess bonus over £25,000.

This tax will require banks to consider their capital position when setting the level of bonus payments above the exemption threshold, which is set at the level of median earnings in the UK. If banks choose to make significant bonus awards it is only fair that they contribute more to the fiscal consolidation of the UK economy, in a year when profits have been facilitated by significant taxpayer support for the banking sector as a whole.

This tax is a one-off measure and will apply until 5 April 2010.