The UK Treasury has decided to jack up the tax it has begun levying on banks, as the industry is looking stronger.

When the government introduced the levy it announced that a reduced rate of 0.05% (down from the full rate of 0.075%) would apply in 2011, in recognition of the uncertain market conditions prevailing at the time.

The government has now decided that this is no longer necessary, and so will charge the banks 0.1% for two months to offset the lower rate charged in January and February, before moving to 0.075%.

The UK Treasury points out that the Bank of England recently noted that the near-term outlook and resilience of the UK banking sector has improved. Additionally, markets also now have certainty over the timing and direction of regulatory change, with the Basel III regulatory reforms not being introduced until 2013 at the earliest and including extended transition periods, it said.

The move is expected to raise an additional £800 million ($1.27 billion) in tax revenue for 2011. This increase in the rate of the levy will mean that it raises £2.5 billion ($3.98 billion) in 2011, the same as the target revenue for future years.