Finance (No. 2) Bill

Joshua Reynolds Excerpts

Wednesday 11th March 2026 Commons Chamber

[Dan Tomlinson]

The hon. Gentleman raises an important point. We need to do all that we can to ensure that we are simplifying our tax code in order to make it easier for tax advisers, individuals and businesses. I have also asked that question, but I am reassured by my officials—I am sure that the hon. Member could consult Hansard too—that this is a typical number of amendments to be made to a Finance Bill. This is a long Finance Bill, but there are a whole range of important changes that the Government wish to introduce and to make progress on. I am sure Members from all parties have enjoyed poring over the changes to the tax legislation. I do take his point about simplification, though; it is something that I wish to focus on. If hon. Members have good ideas in that space, they would genuinely be welcome to write to me.

[Mr Joshua Reynolds (Maidenhead) (LD)]

On the simplification of our tax system, I do not see in the Government amendments any changes to the loan charge system, as we proposed in Committee, meaning that people who have already settled their loan charge will be excluded from the changes being introduced. Does the Minister agree that one consequence of this might be that when something like this comes up in the future, people will not want to settle with the Government because they will think that a better deal will be coming up? Would it not be a simpler tax system to say that we could retrospectively apply some of these changes?

[Dan Tomlinson]

I thank the hon. Gentleman for his intervention and for his engagement in the Public Bill Committee. The loan charge is an important issue. I focused on it after receipt of Ray McCann’s independent review into the loan charge, which was commissioned by my predecessor. The scope of that review and the decisions made by the Government are such that only those who are directly affected by the loan charge will have the opportunity to take up the new settlement that was recommended by McCann, to which the Government have added a £5,000 further deduction. The Government’s position was that, because the loan charge was an exceptional decision made by the previous Government, it was right that the changes proposed by McCann would apply only to that group. There will be those who engaged in the use of disguised remuneration schemes from before 2010, and with them, as with all taxpayers, this Government are very clear that individuals do have a responsibility to pay their tax.

Amendments 54 and 55, and 62 to 66, are minor amendments to the definitions of business property qualifying for relief. They ensure that the replacement property provisions relating to reorganisation or amalgamation of unquoted shares reflect the new legislation, and that unquoted securities, such as loan notes, continue to qualify for relief only where they are part of a controlling interest in a company.

Amendments 15 to 47 to clauses 63 to 67 make a series of minor technical changes to ensure that the provisions on inheritance tax and pensions operate as intended. These ensure that excluded and exempt benefits are not subject to inheritance tax, nor to the new withholding and payment notices.

I am sure that Members from all parts of the House have enjoyed that run-through of those minor and technical amendments. I can provide them with the good news that that run-through has now concluded. I sincerely hope and expect that the proposed amendments will ensure that the legislation that was set out, and that has been discussed and scrutinised, works as intended, and that HMRC—the organisation that I am proud to be the Minister with responsibility for—has the powers to responsibly collect tax and revenue, which funds the vital public services on which our country relies.

I therefore commend new clauses 5, 6 and 7 and Government amendments 12 to 66 to the House, and I look forward to hon. Members’ contributions.

--- Later in debate ---

[Charlie Maynard (Witney) (LD)]

The Bill, and the Budget it derives from, demonstrates clearly that the Chancellor has implemented stealth tax grabs that will hit some of the lowest paid the hardest, through extending a freeze on income tax thresholds and the national insurance contributions increases which suppress employment and wages. It is full of short-sighted harmful decisions that the Liberal Democrats cannot support. Our amendments aim to highlight and reduce some of its more harmful impacts.

I will focus on four particular areas, the first of which is the impact of frozen income tax thresholds. New clauses 15 to 17 would secure additional information and analysis about their impact. As the worrying figures from the OBR suggest, continuing to freeze income tax thresholds will drag an extra 1 million pensioners into paying income tax for the first time by 2030-31, unless the Government act.

[Mr Joshua Reynolds]

My hon. Friend is right about pensioners being dragged into paying income tax. Does he agree that millions of those pensioners will want to be able to contact HMRC and ask it about those changes? Millions of people never manage to get through to HMRC and figures from a written question I put in recently show that HMRC has lost 2,000 customer service staff in the past few years. Does he agree that we need a red phone hotline to allow pensioners to get hold of HMRC for support and advice when they need it?

[Charlie Maynard]

I completely agree. The stress of that is horrific, so the more it can function effectively would be appreciated.

The Government have said that people whose only source of income is the state pension will not pay any income tax over this Parliament, but no details have been provided on how they will be protected. I ask the Government to put an end to the uncertainty and set out plans in full explaining exactly how they intend to shield pensioners from that unfair tax hit. We would love a timeline for when they will do that.

More broadly, extending the stealth tax by two more years will drag an estimated 1.3 million people into a higher tax band by 2029-30: just over 600,000 into the basic rate of tax and just under 700,000 into the higher rate. Those are big numbers. We would really appreciate it if the Government explained to each of the 1.3 million people who will be impacted what it will do to them, because I do not think they are aware of it right now. That disproportionately impacts those on low incomes who will be dragged into income tax for the first time. At the very least, please provide that information.

Next is the impact of the Government’s actions and inactions on youth unemployment, which is building to a real crisis point. Some 16% of all 16 to 24-year-olds are out of work, or almost 740,000 people, which is 100,000 up in the last year—I repeat, 100,000 up in the last year—so something is going wrong with the Government’s policies and we need to get to the bottom of that. The Liberal Democrats have tabled new clause 14, which requires the Chancellor to review and report on the impact of the Bill on unemployment, with particular regard to young people aged 16 to 24.

It is worth noting that this legislation, which dampens growth and hits jobs, comes at a time of broader disruption in the labour market. AI is already having a particular impact on entry level so-called white-collar jobs, but it is also having an impact in pubs. All our local pubs are hiring fewer young people because there is no incentive to do so any more. The creation of a new employers’ national insurance contribution band between £5,000 and £9,100, with a lower rate to incentivise employers to hire often younger, part-time workers, would really help.

In new clause 13, we highlight the complexity of the tax system and the cost of administering it. There is a green brick sitting here masquerading as a Bill. With such a big majority in this Parliament, the Government have a real opportunity to do some serious thinking about how to simplify, root and branch, our tax code. It is disappointing that we see no sign of that actually happening. With this size of legislation being added each time, the tax system is getting bigger and more complex, and that puts a real burden on business. The Treasury Committee, the Public Accounts Committee and the Business and Trade Committee have all spoken out about how much damage our over-complex tax system is doing to our businesses. We would really appreciate anything that the Government can do and if they could get more serious about that.