Finance Bill: Third Reading

Parliament passed the Finance Bill on 3 March 2025 at Third Reading by 339 votes to 172, giving legal effect to the October 2024 Budget. The Bill raises Capital Gains Tax rates, removes the VAT exemption on private school fees, increases the energy profits levy, abolishes the non-domicile remittance basis, and freezes income tax thresholds. Third Reading is the final Commons stage before a Bill passes to the Lords, and a successful vote here means the legislation proceeds with full parliamentary momentum behind it. The Finance Act 2025 enacts the first Labour Budget in 14 years. In practical terms it raises the main Capital Gains Tax rates for individuals to 18 and 24 percent from 30 October 2024, introduces VAT on independent school fees, increases the rate and extends the duration of the energy profits levy on oil and gas producers, and replaces the domicile-based remittance basis with a residence-based tax regime. The threshold freeze means that as wages rise, more taxpayers are pulled into higher bands. Conservative MPs argued during debate that an estimated 9 million pensioners will pay income tax on their state pension from April 2026, and that real household disposable income is forecast by the Office for Budget Responsibility to fall by 1.25 percent by the start of 2029. The vote split almost entirely along party lines. All 330 Labour and Labour and Co-operative MPs who voted backed the Bill, joined by four Independents and all four Green MPs. Every Conservative (91), Liberal Democrat (60), SNP (7), Plaid Cymru (4), Reform UK (5) and DUP (2) MP who voted opposed it, making this a broad cross-opposition rejection despite no cross-party rebels on the government side. The Bill now proceeds to the House of Lords.