Finance (No. 2) Bill Committee: New Clause 7

What happened: On 12 January 2026, the House of Commons sitting as a Committee of the whole House voted on New Clause 7 to the Finance (No. 2) Bill, an amendment put forward by the opposition. The clause was defeated by 341 votes to 188. The government's position was to reject the amendment and maintain the Bill as drafted.

Why it matters: The Finance (No. 2) Bill makes significant changes to how income from assets is taxed in the United Kingdom, including a 2 percentage point increase in dividend tax rates and new higher rates applying to property income. New Clause 7 was one of several opposition amendments seeking to modify or challenge these measures. Its defeat means the government's approach to taxing savings, dividends, and property income proceeds without the changes the opposition proposed. The Bill also extends the freeze on income tax thresholds to the end of the decade, a policy known as fiscal drag, under which rising wages push more people into higher tax bands without any change in the headline rates themselves.

The politics: The vote divided almost entirely along government-versus-opposition lines, with all 335 Labour and Labour-Co-operative MPs who voted opposing the amendment. Conservatives (97 votes), Liberal Democrats (65), the Scottish National Party (9), the Democratic Unionist Party (5), Plaid Cymru (4), Reform UK (2), and the Greens (2) all voted in favour of the amendment. The debate reflected sharp disagreement over whether taxing dividend and property income more heavily discourages enterprise and saving or simply closes a gap between how earned and unearned income are treated. The vote sits alongside a series of related divisions in early 2026 in which the government successfully overturned Lords amendments to the National Insurance Contributions (Employer Pensions Contributions) Bill, underlining a broader pattern of the government defending its autumn Budget tax package against opposition from both chambers.