📜 Finance Bill (First sitting)

• The Finance Bill was discussed in a Public Bill Committee on Tuesday 28 January 2025, chaired by David Mundell and Valerie Vaz.
• The Bill includes provisions to set and confirm income tax rates for the 2025-26 tax year, with no changes to the existing rates of 20%, 40%, and 45% for basic, higher, and additional rates respectively.
• The starting rate limit for savings will remain at £5,000 for the 2025-26 tax year, supporting those with low earned incomes by allowing them to benefit from tax-free savings interest up to this amount.
• A proposal for a new clause requesting a review of the tax liability on state pension income was rejected as unnecessary, due to existing data availability.
• Company car tax rates for 2028-29 and 2029-30 were outlined, with adjustments aimed at gradually narrowing the tax differential between electric vehicles (EVs), hybrids, and petrol/diesel cars. This move is intended to support EV transition while managing public finances.
• The corporation tax rate for the financial year starting April 2026 was set at 25% for the main rate and 19% for the small profits rate, emphasizing the importance of tax certainty for businesses.
• The Bill introduces the undertaxed profits rule (UTPR) as part of the OECD’s pillar two global minimum tax framework. This rule targets multinational enterprises with annual revenues over €750 million, ensuring they pay a minimum effective tax rate of 15% in each jurisdiction.
• Technical amendments to existing tax rules, such as those relating to advance pricing agreements and offshore receipts in respect of intangible property, were proposed to provide more clarity and certainty to taxpayers.
• The abolishment of the furnished holiday lettings (FHL) tax regime from April 2025 was discussed, aimed at leveling the playing field by removing tax advantages for short-term holiday lets compared to standard residential properties.
• Concerns were raised about the impact of these changes on the hospitality sector, especially in rural and coastal areas, given other tax increases affecting the sector.
• Electric vehicle charging point expenditures and zero-emission cars will continue to benefit from a 100% first-year allowance until April 2026, as part of the government’s efforts to support the transition to electric vehicles.

These points reflect key discussions and decisions made during the parliamentary session, aimed at adjusting the UK’s tax framework while supporting economic sectors and ensuring fairness in taxation.

The session exhibits a moderate level of disagreement, primarily centered around technical and policy clarifications rather than intense opposition or conflict. Here is a detailed breakdown of the disagreements observed in the session:

1. New Clause 3 and Pensioners’ Taxation: Gareth Davies from the opposition questions the government’s decision not to support new clause 3, which would require a review of pensioners’ tax liabilities. He emphasizes the need for such a review to assess future tax liabilities on state pension income. However, James Murray, the Exchequer Secretary to the Treasury, argues that the information requested is already available in the public domain, hence the clause is unnecessary. This disagreement focuses on the adequacy and necessity of additional data collection rather than a policy reversal.

2. Company Car Tax Rates: There is some disagreement concerning the alignment of hybrid cars with petrol and diesel cars for tax purposes. Harriet Cross questions the potential impact of this alignment on the hybrid market, seeking clarification. James Murray addresses the concern by emphasizing the gradual nature of the changes and the need for alignment based on recent research on hybrid emissions. The disagreement is more about understanding the policy’s implications rather than a direct contestation of the policy itself.

3. Corporation Tax and Business Certainty: The opposition, represented by Gareth Davies and Harriet Cross, expresses concerns about the government’s non-binding commitment not to raise corporation tax beyond April 2028. They argue that the government’s pledges on tax thresholds offer speculative future benefits while causing immediate fiscal burdens elsewhere. While the government insists on providing certainty through a road map, the opposition critiques the broader impact on businesses due to other fiscal measures. This disagreement revolves around the credibility and comprehensiveness of the government’s tax policy assurances.

4. Furnished Holiday Lettings Regime: The discussion on clause 25 shows the opposition questioning the broader impact of abolishing the furnished holiday lettings tax regime, especially in light of the government’s other fiscal policies affecting rural and coastal economies. They argue that the policy was announced in a different economic context and should be reconsidered. The government maintains that the measure levels the playing field between different types of property businesses, and the discussion remains more focused on the policy’s broader context rather than its core content.

Overall, most disagreements in the session are about the interpretation, impact, and implementation of policies rather than fundamental opposition to the policies themselves. The session lacks significant divisions or vehement opposition, with the disagreements being more constructive and centered on policy clarification and broader fiscal considerations.