Clause 1

Caroline Nokes Excerpts

Monday 12th January 2026 Commons Chamber

Question proposed, That the clause stand part of the Bill.

[The Second Deputy Chairman]

With this it will be convenient to consider the following:

Clauses 2 to 6 stand part.

Schedule 1 stand part.

Clauses 7 and 8 stand part.

Schedule 2 stand part.

New clause 2—Review of the impact of section 7 on rent prices—

(1) The Chancellor of the Exchequer must, within three months of this Act being passed, lay before the House of Commons an assessment of the impact of implementation of section 7 of this Act on rent prices.

(2) The assessment made under subsection (1) must—

(a) estimate the proportion of the increase in income tax on property income that is passed on to renters through higher rents,

(b) analyse the impact on renters by—

(i) region, an

(ii) income decile, and

(c) set out the methodology used to reach those estimates.”

New clause 10—Statements on increase in dividend ordinary and upper rates—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, make a statement to the House of Commons on the increase in dividend ordinary and upper rates introduced by section 4 of this Act.

(2) The statement made under subsection (1) must include details of the impact on—

(a) household saving decisions;

(b) the domestic equity market;

(c) institutional investors; and

(d) outcomes for all British savers and pensioners.”

This new clause requires the Secretary of State to make a statement on the impact of increase in dividend ordinary and upper rates.

New clause 11—Statements on saving rates of income tax for tax year 2027-28—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, make a statement to the House of Commons on the saving rates of income tax for the tax year 2027-28 introduced by section 5 of this Act.

(2) The statement made under subsection (1) must include details of the impact on—

(a) household saving decisions; and

(b) outcomes for all British savers and pensioners.”

This new clause requires the Secretary of State to make a statement on the impact of the saving rates of income tax for tax year 2027-28.

New clause 12—Sections 6 to 8 and Schedules 1 and 2: impact on private rental sector—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the changes introduced by sections 6, 7, and 8 of this Act on the private rental sector in England, Wales, Scotland, and Northern Ireland.

(2) The assessment made under subsection (1) must consider -

(a) the effects of the provisions of sections 6, 7, and 8 on the cost of private rent in each region within England, Wales, Scotland, and Northern Ireland,

(b) the effects of the provisions of sections 6, 7, and 8 on the supply of private rental properties in each region within England, Wales, Scotland, and Northern Ireland,

(c) any other implications of the changes introduced by sections 6, 7, and 8 of this Act.”

This new clause requires the Secretary of State to publish an assessment of the impact of imposing new rates of income tax on property income.

--- Later in debate ---

[Dan Tomlinson]

If I may, I will make a little more progress.

Those with small amounts of income from assets will continue to be protected by tax-free allowances, and income from savings and investments held in individual savings accounts will continue to be tax-free. The vast majority of UK taxpayers are unaffected by these changes as they do not have taxable property, dividend or savings income. Changes to savings and dividend income will apply UK-wide, and the Government have engaged closely with the devolved Governments of Scotland and Wales to provide them with the ability to set property income rates in line with the current income tax powers in their fiscal frameworks.

Clause 4 will increase the tax rates applicable to dividend income by 2 percentage points for the 2026-27 tax year. Clause 5 will increase the tax rates applicable to savings income by the same amount. Clauses 6 and 7 will create separate tax rates for property income, which will apply from the 2027-28 tax year. The property basic, higher and additional rates will be set at 22%, 42% and 47%, respectively, for the 2027-28 tax year. Clause 6 will also make changes to the income tax calculation so that general reliefs and allowances will be applied to property income, savings and dividend income only after they have been applied to other sources of income.

Clause 8 will make provision for the Scottish Parliament and the Senedd to set devolved property income tax rates. This power will be commenced by the Treasury if the Scottish and Welsh Governments agree—individually, of course—to take the power, which is the typical process to protect the powers and responsibilities of devolved Governments.

These changes will still ensure that those with the broadest shoulders contribute more. In 2029-30, around two thirds of the revenue from the increases to the dividend, property and savings tax rates is expected to come from the top 20% of households. Taken together, these measures are projected to yield £2.2 billion in additional tax revenue by 2029-30.

This Finance Bill is about delivering on choices—choices to protect ordinary workers; choices to cut their energy bills, freeze train fares and prescription charges; and choices to focus on reducing inflation to push down mortgage costs. It delivers the Government’s commitment to this country to build a stronger and fairer economy where living standards rise and child poverty falls, and to ensure that public services are improved, with every measure in the Bill geared towards those high-level goals. The choice at the Budget was austerity and decline or investment and renewal, and this Labour Government back investment and renewal.

[The Second Deputy Chairman of Ways and Means (Caroline Nokes)]

I call the shadow Minister.

[Gareth Davies (Grantham and Bourne) (Con)]

I wish to speak, on behalf of the official Opposition, to new clauses 10 to 12, which are in my name, but first, I want to set the scene on clauses 1 to 8.

--- Later in debate ---

[Dr Sandher]

I am not sure I quite follow the hon. Gentleman’s point there, to be perfectly honest. It is true that most people’s main savings investment will be through the pension funds they own, which will be their biggest savings vehicle; that would not be subject to dividend taxation in the same way because people will buy out at the end and ensure that they have a payment for their products. I am not sure I quite follow, but, to be fair to the hon. Gentleman, it is possible that I misunderstood his point.

I can see there are lots of people trying to get in, Ms Nokes. [Laughter.] I will end my speech now to allow them to do so. It is a thrilling topic, as I am sure everyone across the Committee would agree.

This is the right thing to do to balance taxation between earnings and payments from wealth. It is a long-needed update to our taxation system. I am proud of a Government who do that, as I am sure we all are. With that, I will close.

[The Second Deputy Chairman of Ways and Means (Caroline Nokes)]

I call the Liberal Democrat spokesperson.

[Daisy Cooper (St Albans) (LD)]

I will speak to clauses 1 to 8 and schedules 1 and 2. Overall, the tax changes increase complexity, raise the tax burden on small businesses and savers, and raise the risk of serious unintended consequences on the property market. They all have the hallmarks of a Treasury tax grab without proper the consideration of the broader consequences.

When taken together, clauses 4 to 8 add more complexity, and concerns have been raised by the Chartered Institute of Taxation and the Association of Taxation Technicians, which highlighted that the new property rates add five new income tax rates. They are: the property basic rate of 22%; the property higher rate of 42%; the property additional rate of 47%; the property trust rate of 47%; and the savings trust rate of 47%. Rates will apply differently to investment returns and to savings. Basic and higher dividend rates have been changed, but additional dividend rates have not, and no explanation has been given as to the policy intent behind that. It would be helpful if the Minister could set that out on the record.

The long and short of it is that the Government say that they want to simplify tax, but their tax changes are making things more complicated. The Making Tax Digital forms will need to updated, and more individuals and small businesses will likely make more calls to His Majesty’s Revenue and Customs. Recent research by the House of Commons Library, commissioned by Liberal Democrats including my hon. Friend the Member for Maidenhead (Mr Reynolds), shows that HMRC failed to pick up one in five taxpayer calls over the last decade, with the tax service leaving the best part of a hundred million calls unanswered in the last 10 years. HMRC has failed to pick up 83 million calls from Brits in the last 10 years—6 million in just the last year. That is why we have been calling for a new HMRC hotline dedicated to supporting pensioners. It would help those who are among the likeliest to seek tax information over the phone while freeing up capacity for the tax service to deal with other queries—something that is imminent, given that the tax changes will result in more phone calls.

More broadly, the Federation of Small Businesses said:

“Hikes to dividend tax mean the Government continues to make investing in your own business one of the least tax-friendly things you can do with your money.”

Will the Minister listen to our small businesses, which are suffering under a mounting tax burden, not least from the Government’s business rates bombshell, and finally give them some respite?

With new clause 2, the Liberal Democrats call for a review of the impact of section 7 on rent prices. As many hon. Members have highlighted, the new clause would require the Chancellor of the Exchequer to lay before the House a proper assessment of the impact of the Bill’s tax changes on rent prices. Countless renters across the country will be worried that the higher property income tax will simply get passed on to them, making things even worse during the cost of living crisis. We cannot afford to ignore the unintended consequences of any tax policy.

The new clause would require the Government to update the House on some crucial details about the broader impacts of this measure. What proportion of the tax rise will get passed on to renters, according to the Treasury’s estimates? Which income groups are most likely to be affected by the tax rise? Which parts of the country will bear the brunt of it? I hope the Minister will agree that that information is essential.