What Is a Bank Levy?

A bank levy is a type of taxation system on financial institutions of the United Kingdom in which banks are forced to pay government taxes over and above any normal 澳洲幸运5开奖号码历史查询:corporate taxes that they may incur due to the risks they pose to the larger economy. A bank levy also refers to a situation in which a bank accouওnt is frozen due to a creditor’s legal attempt to get a debtor to repay its debt.

Understanding a Bank Levy

Bank levies came into prominence following the 澳洲幸运5开奖号码历史查询:2008 global financial crisis when many of the world's financial institutions were bailed out by their national governments to avoid an even more disastrous outcome than what had already occurred. Subsequently, many economic leaders and pundits called for a tax on banks to prevent excessive employee bonuses, especially considering that many of the financial institutions would have ceased to exist had it not been for publicly funded 澳洲幸运5开奖号码历史查询:government bailouts.

A bank levy is a tax on all U.K. banks’ 澳洲幸运5开奖号码历史查询:balance sheets, mostly their debts. Each year, the value of all funds deposited in the banks is assessed and taxed. This is done in order to maintain financial discipline and prevent outlandish spending, bonuses, or possible overly risky behavior. The levy is imposed to control the banks’ risky borrowing activities that contributed to the 澳洲幸运5开奖号码历史查询:credit crisis. ♚The proceeds from the tax are set aside by the government to create an insurance fund to bail out the industry in the event of a future crisis so as not to make taxpayers pay for bailouts.

The levy is calculated on total aggregated 澳洲幸运5开奖号码历史查询:liabilities and equity excluding:

• Borrowing backed by U.K. government debts
• Ordinary deposits covered by the U.K.'s deposit insurance scheme
• The first £20 billion of any bank's taxable debts

The bank levy rate for short-term chargeable liabilities is an annually decreasing rate and is set to decrease gradually over time to 0.10% in 2021. For the 2020 tax year, the bank levy for short-term chargeable liabilities is 0.14%. Long-term chargeable equity and liabilities are taxed at half these raꦯtes as they are deemed to be inherently less risky—0.07% in 2020 and dropping to 0.05% in 2021.

Bank Levy by Creditors

Outside of the UK, a creditor that obtains a court judgment against a debtor may be able to have the court issue a bank levy. The bank levy a💎llows a bank to freeze the account(s) of a debtor until all the sought-after debt is repaid🎉 in full. If the levy is not lifted, the creditor can take the funds from the bank account and apply them to the total debt owed.

A bank levy is not a one-time event. A creditor can request a bank levy a⛦s many times as needed until the debt has been satisfied. In addition, most banks charge a fee to their customers for processing a levy on their account.

A bank levy can occur due to either unpaid taxes or unpaid debt. Some types of accounts, such as 澳洲幸运5开奖号码历史查询:Social Security benefits, 澳洲幸运5开奖号码历史查询:Supplemental Security Income, Vet🍒eran’s Benefits, and child support payments, generally cannot be levied. A debtor who owes money to the federal government would not have as much protection as they would if they owed a private creditor.

The 澳洲幸运5开奖号码历史查询:Internal Revenue Service (IRS) and the Department of Education (DoED) usually use the bank levy the most, but other creditors can use this method as well. Private creditors typically need a legal court order to proceed with a b﷽ank levy but the IRS typically does not. Usually, the debtor is not given a warning by their bank or by the creditor that their account will be frozen. At this stage, the creditor will have made numerous attempts already to collect the debt, so the debtor should be aware of the type of situation they are in.

In most cases, a debtor is allowed to dispute the levy, which may prevent the levy or reduce the amount the creditor is able to access. Reducing the amo🉐unt so that the creditor does not have access to all the funds in an account is an important aspect for a debtor, as they could possibly lose any cash needed to pay for essential items such as🌊 food and rent.