Osbourne Summer Budget
George Osborne's summer budget is scheduled for 8 July Getty

The British Bankers' Association and the Institute of Directors have both urged Chancellor George Osborne to make significant changes to the UK tax system.

The BBA sent a letter to the chancellor asking him to get rid of the bank levy introduced in 2010, which costs the industry billions each year, in his emergency budget statement on 8 July, in order to save the UK's position as financial hub.

Anthony Browne, the BBA's chief executive, wrote: "The time is overdue for a strategic review of the government's policy for taxing banks, to ensure that the tax regime for banking remains competitive. We would like the government to consider reform of the bank levy."

The association used to keep its head down regarding the levy and the letter shows a significant change in tone as banks lose their patience. HSBC has already discussed plans to move its headquarters before 2016, naming the high costs of the levy as one of the main reasons for a possible relocation.

More about the summer budget

Banks claim it restrains those headquartered in the UK, giving other financial hot spots an unfair advantage. Although the levy was imposed to protect retail bank customers, Osborne now says the drag on the UK's financial industry would have a negative impact on the country's economy.

The levy was introduced as a 0.05% additional tax to banks but after nine adjustments, the tax is now at 0.21%.

'Reform the tax system'

The Institute of Directors has called on Osborne to reform the country's tax system, arguing its complexity would withhold investments.

Simon Walker, director general of the IoD, said: "The chancellor has the opportunity to deliver an investment-boosting budget, making it easier for businesses to raise capital, and promoting investment in the private sector."

Calling the current system "painfully complex", the IoD asked Osborne to review taxes and make them more simple and sensible in the emergency budget after the Conservative majority victory in the May general election.

George Osborne HSBC