Finance (No. 2) Bill Committee: Amendment 3

What happened: On 12 January 2026, the House of Commons, sitting as a Committee of the whole House, voted on Amendment 3 to the Finance (No. 2) Bill. The amendment was defeated by 344 votes to 185. The amendment, tabled by opposition parties, sought to modify the government's proposed tax measures as set out in the Bill. Labour and Labour and Co-operative MPs voted unanimously against the amendment, while Conservatives, Liberal Democrats, the SNP, the DUP, Plaid Cymru, and most Reform UK members voted in favour.

Why it matters: The Finance (No. 2) Bill implements a package of tax changes for the 2026-27 tax year and beyond, including a 2 percentage point increase in dividend income tax rates, higher taxes on property income, and the continued freeze of income tax thresholds. These measures collectively raise significant revenue for public services but also draw substantial criticism for the effects of fiscal drag, meaning that frozen thresholds push more taxpayers into higher rate bands without any change to the rates themselves. The defeat of this amendment confirms that the government's preferred approach to these tax measures will proceed unamended. The measures affect landlords, savers, dividend recipients, and, through fiscal drag, a large share of ordinary income taxpayers.

The politics: The vote divided almost entirely along government-versus-opposition lines, with Labour and its Co-operative allies voting as a bloc to defeat the amendment, and the main opposition parties uniting to support it. The Conservatives, Liberal Democrats, SNP, DUP, and Plaid Cymru all voted for the amendment, reflecting a broad cross-opposition coalition against the government's fiscal approach rather than any shared alternative policy vision. Two Reform UK members supported the amendment while six were absent, suggesting limited engagement from that party. This vote sits within a wider pattern of the government defending its autumn 2024 and 2025 Budget decisions against sustained opposition criticism, a pattern also visible in related votes on National Insurance contributions in March 2026, where the government similarly defeated opposition and Lords challenges to its fiscal agenda.