Finance Bill 2025-26
This page includes notes, resources, and links about the Finance Bill 2025-26, which will soon move to the Report stage, which allows MPs and peers to examine further amendments to the Bill.
What’s in the Bill?
(with links to CIOT briefings produced for MPs where these are available)
The Bill followed Budget 2025 and was the Labour government’s second Finance Bill.
The Bill – at a hefty 554 pages - introduces two, arguably three, new taxes: a new annual levy on the most valuable properties, a vaping products duty and a UK carbon border adjustment mechanism. It abolishes bingo duty and diverted profits tax, the latter being replaced by a new mechanism for charging ‘unassessed transfer pricing profits’ within corporation tax.
Part One of the Bill deals with changes to income tax, capital gains tax and corporate taxes. This includes the usual legislation enabling the government to collect income tax and corporation tax in the year ahead (both need to be annually renewed) as well as confirming that the main rates of these taxes will not be changed and that income tax thresholds will remain frozen all the way through to 2031.
Part Two of the Bill makes changes to inheritance tax, most notably restricting agricultural and business property reliefs and bringing unused pension pots within scope of IHT.
Part Three of the Bill makes changes relating to other existing taxes. As well as the usual setting of rates for alcohol, tobacco and vehicle excise duties (among others), there are high profile changes applying VAT to top-up payments under the Motability Scheme (clause 77) and excluding suppliers of private hire and taxi journeys from the VAT Tour Operators Margin Scheme (the so-called ‘taxi tax’). This part of the Bill also contains a clause scrapping bingo duty (clause 85).
Part Four of the Bill introduces a new excise duty on vaping products, called vaping products duty. The new duty will come into effect from 1 October 2026.
Part Five introduces the UK’s Carbon Border Adjustment Mechanism (CBAM). The CBAM will place a carbon price on emissions embodied in some goods which are imported into the UK, ensuring that certain carbon intensive imported goods face a comparable carbon price to that paid by domestic manufacturers. The tax will apply from 1 January 2027.
Part Six contains measures aimed at combatting tax avoidance. Chapter 1 seeks to impose a statutory prohibition on promoting avoidance arrangements that have no realistic prospect of success. Chapter 2 introduces a new power for HMRC to issue Promoter Action Notices, to require businesses to stop providing goods or services to promoters of tax avoidance where those goods or services are used in the promotion of avoidance. Chapter 3 introduces a new power for HMRC to issue information notices in relation to individuals and entities suspected of being connected to the promotion of tax avoidance schemes. Chapter 4 includes proposals to allow HMRC to publish the names of legal professionals who carry on promotion activities, and updates the civil penalty regime for failing to comply with DOTAS (Disclosure of Tax Avoidance Schemes) obligations.
Part Seven introduces a new requirement for all tax advisers to register with HMRC if they wish to interact with HMRC on behalf of a client. It defines a ‘tax adviser’ and sets out the process and registration conditions as well as the penalties for a failure to comply. A second chapter includes proposals to increase HMRC’s powers to investigate and sanction tax advisers who seek to facilitate non-compliance by their clients.
Part Eight contains miscellaneous other provisions, including changes to Making Tax Digital (MTD) for Income Tax described as ‘finalising the design’ of the project (clauses 253-258). This includes creating powers for HMRC to cancel and reset penalties, and to allow a ‘reasonable excuse’ to have effect in the expiry of late submission points, so the return may be treated as being filed on time.
Other clauses in this part of the Bill expand HMRC’s data-gathering powers (clause 252), increase corporation tax late filing penalties (clause 262) and give HMRC the power to issue advance tax clearances to entities undertaking large investment projects in the UK (clause 263).
The CIOT have produced several briefings on Finance Bill 2025-26, including:
Public Bill Committee briefings
- Conduct of Tax Advisers and Power to Publish Information
- Chargeable gains - Restriction of relief on disposals to employee-ownership trust
- Anti-avoidance rule for share exchanges and corporate reconstructions and reorganisations
- Employment Taxes and Pensions
- Other International Matters
- Non-UK residents
- Avoidance
- Inheritance Tax
- Value Added Tax
- Plastic Packaging Tax - Pre-consumer plastic
- Registration of tax advisers
Committee of Whole House briefings
- Income Tax – changes to tax rates for property, savings and dividend income
- Inheritance Tax - Agricultural and business property reliefs
- Inheritance Tax - Pension interests
- Gambling duties
Progress of the Bill
(with links to CIOT website reports)
26 and 27 November – 1 and 2 December 2025
Budget 2025: Income and inheritance tax increases pass first parliamentary stage
MPs have agreed the Budget resolutions following four days of debate. The freezing of income tax thresholds, inheritance tax changes and the overall tax burden were amongst the most discussed topics. Voting saw a small rebellion on the IHT reforms.
12- 13 January 2026
MPs have passed sections of the Finance Bill limiting inheritance tax reliefs and bringing pensions pots within the tax’s scope, as well as raising property, savings and dividend income tax, extending the freeze on income tax thresholds and raising taxes on gambling (a lot) and alcohol (in line with inflation).
You can also view CIOT’s Finance Bill 2025-26 Committee of Whole House preview here
27 January 2026
MPs pass Loan Charge Settlement Scheme and changes to the replacement tax regime for non-doms
The first two sittings of the Finance (No.2) Bill Public Bill Committee took place on the morning and afternoon of Tuesday 27 January. During these sessions, the committee considered and passed all clauses up to clause 54.
29 January 2026
Finance Bill 2025-26 Committee: Winter fuel payment charge and taxi tax passed
The third and fourth sittings of the Finance (No.2) Bill Public Bill Committee took place on Thursday 29 January, agreeing clauses 55 to 111.
3 February 2026
Finance Bill 2025-26 Committee: MPs pass measures on promoters and tax adviser registration
The fifth and sixth sittings of the Finance (No.2) Bill Public Bill Committee took place on the morning and afternoon of 3 February. During these sessions, the committee considered and passed all clauses from 112 to 279, as well as debating some new clauses that were tabled by the opposition.
Next step
The date for the Report stage of the Bill has not been set yet, but it will not take place before the week starting 23 February.
Further resources