HMRC Transformation Roadmap

James Murray Excerpts

Monday 21st July 2025 Written Statements

[The Exchequer Secretary to the Treasury (James Murray)]

At spring statement 2025, the Government committed to publishing a transformation roadmap setting out the future direction of the tax and customs system. Today, the Government deliver on that commitment.

The HMRC transformation roadmap outlines the Government’s vision for a more efficient, modernised, and automated tax and customs system. This will enable HMRC to collect more of the tax that is due, while enabling taxpayers and businesses to focus more on what matters to them—contributing to the Government’s mission in their plan for change to boost economic growth.

The plans laid out in the roadmap will enable everyday tasks, processes and compliance to happen with less effort. This will happen through simplified policies and procedures, the application of new technologies like artificial intelligence (AI) and the introduction of more digital self-serve options for taxpayers that give them greater control and offer quicker solutions to their queries.

This transformation will also enable HMRC staff to spend more time helping taxpayers who are in vulnerable circumstances, digitally excluded, or have complex tax affairs. It will free up more of their time to support businesses who are seeking greater certainty over their plans for investment and growth.

I have set the Department three clear priorities to drive these changes forward: improving day-today performance and the customer experience; closing the tax gap; and reforming and modernising the tax and customs system. As part of all three priorities, the Government will continue to simplify tax administration to make it easier for taxpayers and their representatives, all while reaffirming HMRC’s charter standards.

HMRC’s transformation roadmap details the actions that HMRC will take to achieve these ministerial priorities and some of the changes that taxpayers and businesses can expect to see. It is informed by insight and feedback from external stakeholders, who will continue to play a key role in supporting and challenging HMRC as it delivers this ambitious package.

Improving day-to-day performance

HMRC’s day-to-day performance depends on the quality of services provided to taxpayers and their agents. These days, most taxpayers want to interact with HMRC digitally, especially for simple tasks. This means HMRC must improve digital services to give taxpayers greater control over their tax affairs and minimise the need for taxpayers to call or write to them.

As such, the roadmap outlines HMRC’s plan for a minimum of 90% of customer interactions to be digital by 2030. HMRC will become digital first, while continuing to support those who need extra help. Taxpayers who are in vulnerable circumstances, digitally excluded, or have complex tax affairs will continue to be able to access support through existing channels, including phonelines.

Closing the tax gap

The Government have funded a significant increase in HMRC’s compliance and debt workforce, including investment for 5,500 new compliance officers and 2,400 debt management officers. Its workforce will have access to improved tools and receive training to identify those at risk of non-compliance and to recover more of the money owed.

For the most stubborn compliance risks, closing the tax gap necessitates changes to process and policy, including digitalisation, use of automation and integration of AI. HMRC will also tackle tax evasion and other offences, increasing the number of annual charging decisions to 600 a year by 2030, with a focus on tackling frauds that are most harmful to taxpayers and the tax and customs system.

Intermediaries such as tax advisers and software providers play a crucial role in administering the tax and customs system, enabling compliance and trust. Taxpayers should have confidence that any intermediary they choose will help them get their tax right, and HMRC will take steps to raise standards in the intermediary market to stop the minority who cause disproportionate harm to the tax system.

Reform and modernisation

Reform and modernisation of HMRC are fundamental to improving day-to-day performance and closing the tax gap. They will ensure HMRC is an agile department, able to adapt to the changing nature of the wider tax and customs system.

To achieve this, HMRC will modernise its IT infra-structure, making use of innovative technology and AI, robust data capabilities—including new legislation to support cross-Government data sharing—and a highly skilled workforce.

HMRC will also modernise the way it delivers change, empowering people throughout the organisation to explore innovative solutions, embedding “test and learn” approaches, and adopting best practice from the private sector.

HMRC is committed to reporting progress against the deliverables in the roadmap, including through its standard reporting. The roadmap includes a list of metrics to demonstrate progress against each of the three priorities. The roadmap will be regularly reviewed and updated as HMRC, in collaboration with external stakeholders, delivers the future of tax and customs administration.

The HMRC transformation roadmap can be found at: https://www.gov.uk/government/publications/hmrc-transformation-roadmap

[HCWS868]

Draft Finance Bill 2025-26: Tax Documents

James Murray Excerpts

Monday 21st July 2025 Written Statements

[The Exchequer Secretary to the Treasury (James Murray)]

The Government are committed to engaging with interested groups when developing and legislating for tax policy, and we are today publishing draft legislation ahead of potential inclusion in the next Finance Bill.

This will allow for technical consultation on the application of tax policy in legislation and provides taxpayers with greater predictability over future tax policy changes. Alongside this, the Government are making announcements in a small number of technical areas of tax policy to ensure the effective maintenance of the tax system.

The final contents of Finance Bill 2025-26 will be decided by the Chancellor at the next Budget. The Government are also publishing a consultation and a number of tax-related summaries of responses to consultations which have already been conducted.

Publication of draft legislation



Closing the tax gap

The Government are determined to close the tax gap and make sure everyone pays the tax they owe. This is fair, essential for a well-functioning economy, and will help to keep taxes on working people as low as possible.

At autumn Budget 2024 and spring statement 2025, the Government announced the biggest ever package of measures to close the tax gap, including those set out below.

Tackling tax non-compliance in the umbrella company market: the Government are publishing draft income tax legislation to make recruitment agencies accountable for pay-as-you-earn on payments to workers supplied via umbrella companies. Where there is no agency, this responsibility falls to the end client. Regulations giving effect to this measure for national insurance contributions purposes will be laid separately. The legislation creates a joint and several liability, allowing His Majesty’s Revenue and Customs to pursue the agency or end client for payroll taxes that an umbrella company fails to pay on their behalf. This measure will reduce tax non-compliance, raising around £500 million in 2029-30, create a level playing field for compliant businesses, and protect workers from unexpected tax bills.

Enhancing HMRC’s powers, tackling tax advisers facilitating non-compliance: the Government are publishing draft legislation to improve the efficiency and effectiveness of powers that allow HMRC to tackle tax advisers facilitating non-compliance by their clients. This will strengthen HMRC’s powers to collect information from tax advisers, issue penalties where there is evidence of wrongdoing, and publish information about tax advisers where they are subject to sanctions. These measures will help close the tax gap by deterring tax advisers from facilitating non-compliance, and making non-compliant tax advisers responsible for their impact on the tax system.

Modernising and mandating tax adviser registration: the Government are publishing draft legislation which will mandate tax advisers to register with HMRC and meet minimum standards, before being able to interact with HMRC on behalf of clients. The changes will take effect from April 2026.

Closing in on promoters of marketed tax avoidance: the Government are publishing draft legislation for a package of measures to close in on promoters of marketed tax avoidance, whose contrived schemes leave their clients with unexpected tax bills. The package includes new powers for HMRC to focus on those who own or control promoter organisations and strengthening the disclosure of tax avoidance schemes regime.

Charity compliance measures: the Government are publishing draft legislation to change the rules for when donations to charity become tainted and what types of investments are acceptable for charitable tax relief, and changing the rules covering how tax relieved income must be spent for charitable purposes. These measures will support the Government aim of closing the tax gap through strengthening compliance powers to challenge abusive arrangements and poor compliance. They simplify the current tax rules by equalising treatment across all investment types and deal with receipts and expenditure in the hands of the charity. The changes will take effect from April 2026.

The Government will make greater use of data and technology to help individual taxpayers and businesses pay the right tax first time, while making tax digital will help people pay their tax quickly and easily.

Better use of new and improved third-party data to make it easier to pay tax right first time: the Government are publishing draft primary legislation alongside a summary of responses document. This follows the publication at the spring statement of a consultation to make better use of new and improved third-party data to make it easier to get tax right first time.

Making tax digital: the Government are publishing legislation to come into force from April 2026 covering:

Streamlining end of year process for MTD for income tax: draft primary and secondary legislation to streamline the MTD for income tax end of year filing journey. It will require taxpayers using MTD to deliver end of year returns through MTD-compatible software. This delivers a better filing experience for users.

Finalising design of MTD and exempting and deferring certain groups from digital requirements: draft primary and secondary legislation to exempt or defer small groups of taxpayers from MTD for income tax who may face disproportionate barriers to operating MTD or for whom operating MTD for income tax is impracticable. It also makes various minor, technical or policy changes to ensure MTD and penalty reform work as intended.

Lowering the income threshold to £20,000: draft secondary legislation extending MTD for income tax to sole traders and landlords with income over £20,000 from April 2028. This will help ensure more businesses are able to adopt new digital ways of working, supporting their productivity and growth.

Putting the tax system on a fairer and more sustainable footing

At autumn Budget 2024, the Government announced measures to deliver key manifesto commitments, alongside other measures to fix the public finances through a fairer, more sustainable tax system.

The tax treatment of carried interest: the Government are publishing draft legislation to introduce a revised tax regime for carried interest, a form of performance-related reward received by fund managers. This revised tax regime will sit wholly within the income tax framework, with carried interest treated as trading profits and subject to income tax and class 4 national insurance contributions. The changes will take effect from April 2026.

Technical amendments to residence-based tax regime: the Government will bring forward technical fixes to legislation contained in the Finance Act 2025 that replaced the special tax rules relating to domicile. These changes are to ensure that the legislation works as intended. As examples, these technical changes to legislation will include:

Inheritance tax spousal election for non-long term resident spouses: ensuring the election correctly lapses after 10 consecutive years of non-residence have passed;

Section 690: ensuring that the present inclusion of treaty non-residents on a concessionary basis is placed within legislation; and

Temporary repatriation facility: ensuring that the legislation works as intended for offshore income gains and migrating trusts (trusts which were previously settled overseas but are now UK resident).

The Government will set out further details on these amendments in due course.

Inheritance tax, unused pension funds and death benefits: the Government are publishing draft legislation to bring most unused pension funds and death benefits within the value of a person’s estate for inheritance tax purposes from 6 April 2027. Following technical consultation, and in line with the current treatment of pensions already in the scope of IHT, personal representatives, rather than pension scheme administrators, will be liable to report and pay IHT. All death in service benefits payable from a registered pension scheme, including those in scope of IHT under existing rules, will be excluded from the value of an individual’s estate for IHT purposes. This supports the Government objective to build a fairer tax system by removing distortions which have led to pension schemes being increasingly used and marketed as a tax planning vehicle to transfer wealth, rather than for funding retirement. It also removes inconsistencies in the IHT treatment of different types of pensions.

Inheritance tax, agricultural property relief and business property relief: as announced at autumn Budget 2024, the Government are publishing draft legislation to reform these inheritance tax reliefs from 6 April 2026 to make them fairer and more sustainable. In addition to existing nil-rate bands and exemptions, the current 100% rates of relief will continue for the first £1 million of combined agricultural and business property to help protect family businesses and farms. The rate of relief will be 50% thereafter, and in all circumstances for quoted shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM. The changes will take effect from April 2026.

Changes to employee car ownership schemes: the Government are publishing draft legislation which is intended to bring employee car ownership schemes into scope of the benefit in kind rules as company cars. This legislation ensures employees receiving vehicles through these arrangements pay company car tax, ensuring fairness with other taxpayers. The changes will take effect from October 2026.

Maintaining the tax system

The Government are continuing to ensure the tax system operates effectively and delivers on our commitments.

Benefit in kind tax for plug-in hybrid electric vehicles: the Government are announcing that if a new emissions standard for plug-in hybrid electric vehicles is introduced in Great Britain, it will help to mitigate the significant increase in benefit in kind tax that would result from higher carbon dioxide emissions figures.

The Department for Transport will, in due course, consult on introducing the Euro 6e emissions standard for cars and vans in Great Britain from April 2026. The standard already applies in Northern Ireland from January 2025. Where the standard applies, this change will significantly increase the BiK tax due on PHEV company cars, which is linked to CO₂ emissions.

The Government recognise that while it is right that higher emitting vehicles pay more tax, company cars continue to play an important role supporting our transition towards zero emission vehicles and the decarbonisation of transport. Subject to the consultation outcome, the Government intend to legislate for an easement that will apply UK-wide between April 2026 and April 2028 to help mitigate the benefit in kind tax impact. In Northern Ireland, the easement will also apply retrospectively to January 2025 in order to ensure consistency across the UK.

Private intermittent securities and capital exchange system: following the announcement on 15 May 2025, the Government are publishing draft legislation to allow employers, with their employees’ permission, to amend existing enterprise management incentive and company share option plan contracts to include a PISCES trading event as an exercisable event, without losing the tax advantages the schemes offer.

Trader provided free legislation, inland border facilities: the Government are publishing draft legislative amendments to existing trader provided free legislation. This will mean that all border locations will be responsible for providing and funding their own customs infrastructure. This measure will affect border locations where this infrastructure is currently provided and funded by the Government at inland border facilities.

Land remediation relief: land remediation relief is a 150% corporation tax relief aimed at incentivising the regeneration of brownfield land and reducing the pressure to develop greenfield sites; the Government are today publishing a consultation that seeks views on the design and impact of land remediation relief as part of the Government support for brownfield development.

Technical fixes

We are also publishing legislation to ensure the effective functioning of tax legislation.

Technical updates to pillar 2 rules: the Government are publishing draft legislation to make technical updates to the UK’s pillar 2 rules in response to stakeholder feedback and to maintain consistency with the latest internationally agreed commentary to the OECD model rules.

Application of overseas restriction for research and development expenditure credit: the Government will legislate to ensure that the overseas restriction operates in Northern Ireland as intended. This legislation will apply to claims made on or after 30 October 2024. The changes will take effect from April 2026.

[HCWS875]

Tax Exemptions: Grenfell Support Scheme and Horizon Convictions Redress Scheme

James Murray Excerpts

Wednesday 16th July 2025 Written Statements

[The Exchequer Secretary to the Treasury (James Murray)]

The Government will legislate to ensure that payments made under the Grenfell Support (Restorative Justice) programme are exempt from income tax. This legislation will apply retrospectively from 5 June 2024, when payments from the scheme started.

His Majesty’s Revenue and Customs will exercise its collection and management discretion and will not collect income tax that may have been due on any payments made from 5 June 2024 to the date the legislation takes effect.

Exempting these payments from income tax means that tax credits claimants who received a payment up to 5 April 2025 should not have seen a reduction in their tax credits award. While no tax credits awards would have been reduced automatically, claimants who reported this payment to HMRC as part of their income for tax credits purposes can contact HMRC to determine whether their tax credits award was correct. HMRC is exploring options to proactively contact those tax credit customers who have received any payments under the Grenfell Support (Restorative Justice) programme.

The Government will also legislate to exempt compensation payments in the expanded Horizon convictions redress scheme. This was expanded on 3 June 2025 to include postmasters with convictions overturned by a court, postmasters who were prosecuted for alleged offences committed while the Horizon system was in use but did not face criminal convictions, and postmasters who received a caution, or in Scotland received an alternative to prosecution or a purported alternative to prosecution from the Post Office, for an alleged offence involving the Horizon system.

The Government are committed to maintaining the tax treatment of the Horizon convictions redress scheme. Therefore, the Government will legislate to formalise the tax exemption and ensure that no income tax, national insurance contributions, capital gains tax or inheritance tax will be payable for redress received under this scheme.

[HCWS827]

Taxes

James Murray Excerpts

Tuesday 15th July 2025 Commons Chamber

[The Exchequer Secretary to the Treasury (James Murray)]

I listened very carefully to the shadow Minister. He has clearly been taking theatrical lessons from his colleague the shadow Chancellor, the right hon. Member for Central Devon (Sir Mel Stride). Indeed, I have listened to all his colleagues during this debate, and frankly they have quite some cheek. They speak from the Opposition Benches, yet they failed to reflect honestly, even once, on why they are on that side of the House.

The reason why the Conservatives are in opposition is that they not only ran our public services into the ground, but had given up on fiscal responsibility, which is critical for stability, investment and growth. When we won the election last year, it was our task to restore that responsibility and fix the £22 billion black hole in the public finances, which was a legacy of the previous Government’s waste and delay. [Interruption.] I know they hate to be reminded of it, but that is the truth. That is what we inherited. As my right hon. Friend the Chief Secretary to the Treasury said in opening the debate, we acted on that without delay on taking office. At last year’s Budget, the Chancellor acted decisively to stabilise the public finances and lay the foundations for investment in growth after 14 years of Tory decline. Rather than shirking responsibility, we took the necessary decisions to raise taxes and made the necessary choices to ensure that our NHS, schools and other vital public services received the funding they needed to get back on their feet.

I thank all the hon. Members whom the shadow Minister mentioned in his summing-up speech, as well as my hon. Friends the Members for Glasgow East (John Grady), for Kensington and Bayswater (Joe Powell), for Bolton West (Phil Brickell), for Rugby (John Slinger), for Alloa and Grangemouth (Brian Leishman), and for Loughborough (Dr Sandher).

Many hon. Members spoke about the choices that we have had to make as a Government. Let me be clear that while many of the decisions on tax have been difficult—we recognise that they have had consequences—we took every opportunity to make them as fair as possible. That is why, at last year’s Budget, we decided to end non-dom tax status and tax breaks for private school fees. It is also why we increased air passenger duty on private jets, raised stamp duty for those buying second homes, extended the oil and gas levy, and chose to raise capital gains and inheritance tax. It is why His Majesty’s Revenue and Customs implemented the biggest package of measures to close the tax gap that this country has ever seen. Those measures will ensure that everyone, including the wealthiest, pay the tax that they owe.

Those choices have been the right ones to restore the public finances and get public services back on their feet, yet the Conservatives, the Lib Dems and Reform—who surprisingly are not here—all voted against our Finance Act 2025, which started to put our choices into action. They have refused time and again to support the decisions we have taken on tax, while refusing to say what funding for public services they would oppose as a result. The choices I have mentioned and other difficult choices we have made, such as the decision around employers’ national insurance, have been necessary to meet our fiscal rules.

Let me be clear why those fiscal rules are so important, and why, under this Government, they will always be non-negotiable. The fiscal rules introduced by the Chancellor last year are this Government’s assurance to the markets that we will live within our means and pay our Government debt. They are not only crucial to keeping debt payments under control, but enable us to invest in the future of our country. Thanks to the Chancellor’s fiscal rules—the stability rule and the investment rule—we have been able to boost capital investment by £120 billion, compared with the previous Government’s plans. That investment will improve transport infrastructure, deliver more social and affordable housing, bring down bills through energy security, unlock further private sector investment and, most importantly, improve the lives of working people across Britain by making people better off.

Without our plans to balance the books and get debt falling, our £120 billion of extra investment would not be possible, and taxpayers would see ever more of their money being spent on debt interest payments. We have taken the tough but fair and necessary choices to repair our public finances, so that we can rebuild our schools, our hospitals and our frontline services across the country.

As many right hon. and hon. Members have said today, if Conservative Members disagree with our approach, maybe they can tell us whether they would cut spending on schools, hospitals or defence, or perhaps they can tell us which taxes they would raise instead. Rather than do that, the Conservatives and Reform are competing with each other to inherit the mantle of Liz Truss. They both blindly make unfunded promises on tax—promises that we all know would force up interest payments for families across Britain and cause economic chaos, which would hit working people hardest. The British people want security, stability, public services that work again, and more money in their pocket, and only Labour Members and this Labour Government are prepared to take the decisions that are necessary to make that happen.

Question put.

Disability Premium Compensation Scheme: IncomeTax Exemption

James Murray Excerpts

Monday 14th July 2025 Written Statements

[The Exchequer Secretary to the Treasury (James Murray)]

The Government will legislate to ensure that payments made across the UK under the Department for Work and Pension disability premium compensation scheme are exempt from income tax. This legislation will apply retrospectively from December 2024, when payments from the scheme started.

[HCWS815]

Legislation Day: Finance Bill

James Murray Excerpts

Friday 4th July 2025 Written Statements

[The Exchequer Secretary to the Treasury (James Murray)]

The Government are committed to developing and legislating for tax policy in a way that achieves long-term economic stability and supports economic growth.

The Government are committed to a single major fiscal event each year, through which the Budget is delivered. Following the Budget, relevant tax policy measures will be legislated for in the Finance Bill or another appropriate legislative vehicle.

The Government will publish draft clauses for the next Finance Bill, covering pre-announced policy changes, on 21 July, along with accompanying explanatory notes, tax information and impact notes, responses to consultations and other supporting documents. All publications will be available on the gov.uk website.

[HCWS779]

Oral Answers to Questions

James Murray Excerpts

Tuesday 1st July 2025 Commons Chamber

[Bobby Dean (Carshalton and Wallington) (LD)]

2. What assessment she has made of the adequacy of the data her Department holds on high net worth individuals.

[The Exchequer Secretary to the Treasury (James Murray)]

His Majesty’s Revenue and Customs uses a range of data sources to monitor the wealthy population. International exchanges of information, including the common reporting standard and US Foreign Account Tax Compliance Act data, offer opportunities to develop deeper insight into the international financial affairs of some of the UK’s wealthiest taxpayers.

[Bobby Dean]

The Minister will no doubt be aware of reports of the so-called exodus of millionaires. Those reports are from “high profile individuals” and city spokespeople, but there are rarely hard numbers behind them. Are Treasury Ministers able to verify the Tax Justice Network’s research that says that just 0.3% of millionaires have exited the UK and that that number has remained low and stable over the past decade, and will they publish their own figures as well?

[James Murray]

When considering fiscal measures or financial changes, the figures that matter are those provided by the Office for Budget Responsibility. The OBR has certified that the non-dom reforms that the Government have implemented will raise £33.8 billion in total revenue, and that figure accounts for some non-doms who are ineligible for the new regime choosing to leave the UK.

[Dr Jeevun Sandher (Loughborough) (Lab)]

Public investment makes us all more prosperous, but clearly that public investment, in our roads, rail and energy infrastructure, needs to be paid for. Will the Minister set out how we are funding that public investment by taxing the very richest people in this country?

[James Murray]

My hon. Friend is absolutely correct that our changes to the non-dom reporting regime are essential to raise billions of pounds to support the public finances and get our public services back on their feet. I contrast that with some of the proposals set out by opposition parties. Indeed, Reform UK’s plans are for a tax cut for foreign billionaires.

[Mr Speaker]

I call the shadow Minister.

[Mark Garnier (Wyre Forest) (Con)]

In her Budget last year, the Chancellor tucked away about £10 billion over the next couple of years from reform to the non-dom tax regime. It is important to remember that the OBR said in its fiscal outlook that that figure was “highly uncertain”, and a high-level survey by Oxford Economics found that fully two thirds of non-doms are considering leaving the country in the next couple years as a direct result of those policies. That implies not an increase of £10 billion but a decrease of £8 billion. The Chancellor has created a fiscal black hole of £18 billion with just one policy alone. In this week of heroic U-turns from the Government Front Bench, will the Minister confirm whether they will be axing this tax? When will it finally be condemned to the history books?

[James Murray]

I am not really sure whether there was a policy suggestion in that comment or not. As the shadow Minister will know, the fiscal black hole that we had to address when we won the general election was the £22 billion black hole that the Conservatives left after their mismanagement of the economy. As I said, the Office for Budget Responsibility has confirmed that our reforms to the non-dom regime, with our removal of non-dom tax status, will raise £33.8 billion over the five years of the forecast. It is the OBR’s figures that we will trust in that regard.

[Rachael Maskell (York Central) (Lab/Co-op)]

3. What fiscal steps she plans to take to help reduce the number of disabled and sick people in poverty.

--- Later in debate ---

[Deirdre Costigan (Ealing Southall) (Lab)]

6. What steps she is taking to help increase funding for the clean energy sector.

[The Exchequer Secretary to the Treasury (James Murray)]

The spending review announced significant investment into clean energy to strengthen our energy security and our economy. That includes over £8.3 billion for Great British Energy and Great British Energy Nuclear and £14.2 billion for Sizewell C.

[Deirdre Costigan]

Although my constituents in Ealing Southall are no doubt sweltering in today’s heat, they are worried that come winter, they will again face eye-watering energy bills to heat their homes. The previous Government left us with the leakiest homes in Europe, slashing grants for loft and cavity insulation. Can the Minister set out the work that this Labour Government are doing not just to support the clean energy sector, but to upgrade my constituents’ homes to take that clean, cheap energy and bring down bills in Ealing Southall?

[James Murray]

My hon. Friend is an excellent advocate for her constituents in Ealing Southall, and I am sure that many of them will benefit from our warm homes plan, which will see £13.2 billion invested across this Parliament. That investment will be allocated to schemes to support the roll-out of heat pumps, alongside energy-efficiency measures and other low-carbon technologies. This will help with environmental goals, but crucially, it will cut bills and tackle fuel poverty.

[Robbie Moore (Keighley and Ilkley) (Con)]

This week, the 19% tariff on imports of US ethanol falls to zero through the 1.4 billion litre quota negotiated by this Labour Government, which represents the size of the UK’s entire ethanol market. That will have a hugely damaging impact on our rural economy, UK jobs and the NHS, with Government effectively offshoring the benefits of ethanol production and its by-products to the US. What conversations are the Chancellor and her team having with this green energy sector, in which a huge number of jobs are now at stake in Teesside and Hull?

[James Murray]

Of course, our colleagues in the Department for Business and Trade are having conversations with those businesses and industries that may be affected. I hope the hon. Member welcomes the trade deal that we got with the US—an economic deal that is so important for our prosperity and will see us being the only country to avoid some of the tariffs that are affecting all other countries around the world.

[Mr Speaker]

I call the shadow Minister.

[Gareth Davies (Grantham and Bourne) (Con)]

It is becoming clear that one year in, the public still do not know what Labour is all about, and the same could be said for its so-called National Wealth Fund. Not only has the National Wealth Fund invested less equity in clean energy than before its costly £7 billion rebrand, but it is also now rightly subject to a Treasury Committee inquiry, at which expert witnesses could not name a single thing it is doing differently. The CEO of the British Business Bank now says the Government did not understand what they were setting up. Can the Minister tell us why the National Wealth Fund has invested less in clean energy than before the costly rebrand and why the Government U-turned on incorporating the British Business Bank?

[James Murray]

The shadow Minister forgets to mention the fact that we have had £30 billion of investment in green energy since the general election. I am sure he has consulted the spending review documents closely—I know he is a diligent shadow Minister in that regard—and he will have seen the investment that we are putting into Great British Energy, Sizewell C, small modular reactors, fusion, nuclear R&D, the warm homes plan, and carbon capture and storage. All of this is to make sure we improve our energy security and bring down bills for good.

[Jim Shannon (Strangford) (DUP)]

7. Whether she plans to provide additional Barnett consequential funding to the Northern Ireland Executive for the winter fuel payment.

--- Later in debate ---

[Sally Jameson (Doncaster Central) (Lab/Co-op)]

8. What assessment she has made of the potential impact of implementing a flat rate of remote betting and gaming duty on the horseracing industry.

[The Exchequer Secretary to the Treasury (James Murray)]

We very much recognise the social and cultural value of horseracing, which is why on-course betting is exempt from duty, and horseracing is the only sport to receive a Government mandated levy. We are consulting on measures to simplify gambling duty and improve compliance. No decision will be made on rates before the Budget, and we are working with the horseracing sector to identify unintended consequences and mitigations.

[Sally Jameson]

I refer Members to my entry in the Register of Members’ Financial Interests. In Doncaster, we are incredibly proud of our historic racecourse, which is home to the iconic St Leger festival. As someone who has attended the racecourse for a number of events throughout my life, I can say that it is part of our local community and brings thousands of jobs. Will the Minister confirm that he will continue dialogue with the horseracing industry, noting that it brings 85,000 jobs to the country nationally and is the second largest spectator sport in the country, and identifying that this is very different from online casinos and games of chance?

[James Murray]

It is excellent to hear my hon. Friend speak so passionately about Doncaster racecourse and the wider sector, and I reassure her that we will absolutely continue close dialogue with the horseracing industry on these proposals. I and my officials are working closely with the horseracing sector to identify any unintended consequences and possible mitigations. We intend to continue those conversations with the industry, and we welcome further engagement.

[Alex Easton (North Down) (Ind)]

How do the Government assess the implementation of a flat rate in terms of improving fairness and simplification for all involved, reducing administrative costs and encouraging compliance?

[James Murray]

One of the principles behind the reforms that we are looking to make to the gambling duty is to tackle issues of compliance by simplifying the system. The consultation is open at the moment, and I encourage the hon. Gentleman, and anyone else who is interested in contributing towards that, to make their views known.

[Nick Smith (Blaenau Gwent and Rhymney) (Lab)]

10. What recent discussions her Department has had with the trustees of the British Coal staff superannuation scheme.

--- Later in debate ---

[Andrew George (St Ives) (LD)]

16. What steps she plans to take to close loopholes in the tax system.

[The Exchequer Secretary to the Treasury (James Murray)]

The year before we came to power, the tax gap stood at £47 billion. That is unacceptable, which is why we announced the most ambitious-ever package of tax gap measures in the Budget, and went even further in the spring statement. We are now forecast to raise £7.5 billion from the tax gap in 2029-30, including by recruiting 5,500 more compliance officers, investing in better technology and closing loopholes. We will bring forward further measures to close the tax gap in the autumn Budget.

[Joe Powell]

As the Minister is no doubt aware, an increasingly common issue on our high streets is phoenixing. That is where a shop unit continues to trade while cycling through multiple limited companies every few months, none of which pays corporation tax, VAT or business rates. Can the Minister encourage officials at His Majesty’s Revenue and Customs to walk along Whitehall, just a few hundred metres from this Chamber, and take a look at whether the series of Harry Potter-themed gift shops across London—which have been accused by “London Centric” of doing exactly that—are playing by the rules? Will they ensure that tax enforcement supports legitimate small businesses on our high streets?

[James Murray]

My hon. Friend is a powerful campaigner and advocate for tackling those who do not play by the rules. While I am unable to comment on individual taxpayer affairs because of my position, I very much recognise the issue. We are determined to tackle this problem, and HMRC is working across Government on enforcement action, including work with Companies House and the Insolvency Service to tackle phoenixism.

[Andrew George]

Does the Minister agree that instead of handing £500 million of taxpayers’ money to those who are entitled to small business rate relief, which is what has happened in Cornwall over the past 10 years, it would be far better to invest that money in desperately needed first homes for local families in desperate housing need, rather than give it to second home owners? Would he be prepared to meet me, so that we can establish a better method of achieving housing justice through tax policy?

[James Murray]

I am happy to hear from the hon. Gentleman about how he will support our home-building plans in his constituency and across the country. We know that the most important thing to tackle the housing crisis is to support the reforms that this Government are making to the planning system to make sure we can build 1.5 million new homes and invest £39 billion in our 10-year affordable homes programme—the biggest in a generation.

--- Later in debate ---

[Brian Leishman (Alloa and Grangemouth) (Lab)]

T4. I want to ask about the £200 million national wealth fund commitment for Project Willow. How will it be accessed? What is the minimum and maximum amount that can be accessed by an applicant? If it is exclusively for businesses, will it be based on being positioned within the existing footprint of the Grangemouth site that is owned or operated by Petroineos or INEOS?

[The Exchequer Secretary to the Treasury (James Murray)]

There is £200 million available, and the Government will look at all proposals for investing it.

[Mr Speaker]

I call the shadow Chancellor.

--- Later in debate ---

[Ms Stella Creasy (Walthamstow) (Lab/Co-op)]

The main beneficiaries of Brexit have been printers, because of all the extra paperwork that the previous Government created. The National Audit Office has estimated that their border arrangements have cost us £4.7 billion and rising, and the single trade window will add to the red tape. Does the Chancellor agree that the best way to reduce the paperwork requirements in the first place is to do a good deal with Europe, and will she update us on her progress on that?

[James Murray]

My hon. Friend will have seen the Prime Minister’s work to reset relations with the EU. She mentions the single trade window, and it is the Government’s intention to deliver that. More widely, the Government are committed to minimising the administrative burdens and frictions experienced by businesses trading internationally.

[Jack Rankin (Windsor) (Con)]

T7.   We all know that there is a difference between welfare cuts and welfare reforms. These cuts were the maths of Treasury mandarins. It is the same thinking that saw winter fuel payments taken from pensioners. Now that the Government have U-turned on both of those, when will they finally back British farming and U-turn on the family farm tax?

--- Later in debate ---

[Greg Smith (Mid Buckinghamshire) (Con)]

A recent freedom of information request has revealed that, for a number of schemes, HMRC has settled with large corporations for just 15% of what was owed. With the loan charge review ongoing, does the Chancellor agree with me that individuals should be treated no differently from the large corporations for which this precedent has been set?

[James Murray]

I thank the hon. Gentleman for his question; he has engaged with me about the loan charge previously. As he knows, there is an independent review of the loan charge at the moment, and I think it is important that I as a Minister do not comment on that. Let the independent reviewer complete his work and report back to us as a Government.

[Emily Darlington (Milton Keynes Central) (Lab)]

The loan charge scandal was absolutely awful and has devastated the lives of tens of thousands of people. It failed to be addressed under the last Government. Can the Minister please tell us what he is doing to make sure people are not still being sold this illegal product?

[James Murray]

I thank my hon. Friend very much for her question. I can reassure her that, alongside the loan charge review, the Government have published a consultation on a comprehensive package of measures to close in on the promoters of marketed tax avoidance schemes. As we know, these contrived schemes both deprive public services of funding and leave their clients with unexpected tax bills.

[Esther McVey (Tatton) (Con)]

Does the Chancellor believe that the changes she has made to employer’s national insurance contributions will lead to higher levels of employment, or will they lead to higher levels of unemployment?

VAT Registration Threshold: SMEs

James Murray Excerpts

Tuesday 24th June 2025 Westminster Hall

[The Exchequer Secretary to the Treasury (James Murray)]

It is a pleasure to speak with you as Chair, Mr Vickers. I congratulate the hon. Member for Mid Leicestershire for securing this debate. I feel that I am letting the side down by not having a quote from Napoleon to open my remarks, but I listened carefully to the hon. Member’s contribution to the debate, and to the contributions of all hon. Members, including the shadow Minister—the hon. Member for Grantham and Bourne (Gareth Davies) —and the Liberal Democrat spokesperson, the hon. Member for St Albans (Daisy Cooper). I hope that my remarks will address most of the points that they raised.

It is clear from all hon. Members’ contributions to this debate that, across the House, we agree on how valuable small businesses and entrepreneurs are to the local economies and communities in the areas we represent. As a Government, we recognise that contribution. Before I turn to the VAT threshold, the focus of this debate, I will briefly set out the wider support that the Government are providing to the small businesses that are so important in our constituencies across the country. That support includes measures set out only yesterday in the industrial strategy. A new business growth service will streamline small businesses’ access to Government support, advice and funding, providing the access that the Liberal Democrat spokesperson asked about. Reforms to public procurement will help small businesses to secure Government contracts. We will help small businesses to adopt new technologies. We will continue to tackle the challenge of late payments to SMEs. The Government are also planning to publish an SME strategy later this year, giving more detail on the Government’s wider offer for small businesses.

Hon. Members will also be aware that the Chancellor recently announced the 2025 spending review, which contained measures to support small businesses. In particular, the Chancellor increased the financial capacity of the British Business Bank to £25.6 billion, which will enable a two-thirds increase in support for small businesses across the UK. That support in the spending review sits alongside the Government’s support for small businesses through the tax system. We have more than doubled the employment allowance to £10,500 and expanded it to all eligible employers. We have frozen the small business rates multiplier to protect small properties from inflationary bill increases to business rates. We are introducing permanently lower business rates for smaller retail hospitality and leisure businesses from 2026, and we have committed in the corporate tax road map to maintaining the small profits rate and marginal relief at their current rates and thresholds, as well as maintaining the £1 million annual investment allowance.

I will now turn to the VAT threshold, which is the focus of this debate. As several hon. Members have said, a number of businesses have raised concerns about that threshold. In particular, they are concerned that the cliff edge of the £90,000 threshold, as it is, may disincentivise businesses that are close to the threshold from growing and surpassing it, and they have connected concerns about the level at which the threshold is set.

Let me first address the argument that the threshold disincentivises small businesses from growth as they approach it. I acknowledge that some businesses will take legitimate action to avoid reaching the VAT threshold, and will bunch just below that threshold. However, those businesses are a minority, accounting for around 0.5% of all businesses that are not VAT-registered. Some businesses, and indeed some hon. Members in this debate, have suggested that the Government should introduce a taper mechanism, in which the amount of VAT that businesses must charge is phased in. However, there is little evidence to suggest that a taper would tackle the bunching of businesses just below the threshold, although it would add additional complexity to the tax system. At £90,000, the UK has a higher VAT registration threshold than any EU member, and the joint highest in the OECD. That threshold keeps most UK businesses out of VAT altogether.

[Mike Martin]

I am sure that the Minister is aware that the UK is one of only three countries in Europe that does not offer a lower rate of VAT for hospitality and tourism. For example, France, Italy and Spain charge only 10% on those sectors. Will he consider lowering the rate for those sectors as part of the UK’s VAT regime to give our high streets the boost they need?

[James Murray]

I will turn to the questions that the hon. Gentleman and other hon. Members have raised about VAT reliefs in a moment, but I will first finish the point about where the VAT registration threshold is set, because that is an important part of the debate.

It is worth reflecting on the fact that views on the threshold are divided. The case for change has been regularly reviewed over the years, because some businesses argue that a higher threshold would reduce their administrative and financial burdens. However, other businesses contend that a lower threshold would provide a fairer competitive environment, for instance in the hair and beauty sector.

The Government’s approach to the VAT threshold and applicable rates aims to balance the potential impacts on small businesses, including their growth and financial sustainability, with the economy as a whole and, of course tax, revenues. Although the Government always welcome hearing businesses’ views about how the tax system operates, we are not currently planning to change the design of the VAT threshold.

More broadly on VAT, the Government often receive calls from businesses, and indeed from hon. Members, to examine the rate of VAT for specific industries. VAT is a broad-based tax on consumption and the 20% standard rate applies to most goods and services. VAT is the UK’s third largest tax and is forecast to raise £180 billion in 2025-26. Of course, tax breaks have an impact on the public finances and they must represent value for money for the taxpayer, so exceptions to the standard rate have always been limited and balanced against affordability considerations. The assessment of any new VAT relief should consider whether the cost saving is likely to be passed on to consumers.

Fundamentally, the best support that we can provide to small businesses is economic growth. Delivering secure, strong and sustainable growth to boost prosperity and living standards across the UK is the Government’s No. 1 mission, as set out in our plan for change. That is why, when we took office, we took the necessary decisions to provide the stability that is so important for investment and growth by tackling the £22 billion hole in the public finances that we inherited from the previous Government.

[Robbie Moore]

I struggle to understand how the Minister can come out with these pre-written speeches and expect anyone to believe him. How can he say that stability has now been put back into the wider economy when many hard-working businesses, including the SMEs that many hon. Members have talked about in this debate, are struggling to deal with the consequences of employer’s national insurance contributions rising; the consequences of VAT, which we are debating today; and the consequences of the Employment Rights Bill, which are coming down the line? Yet he still stands at the Dispatch Box and comes out with the bizarre claim that the Government have installed stability with their plan for change. That is nonsense.

[James Murray]

I think the hon. Gentleman must be forgetting the recent history of this country’s economy when his party was in charge, because the many small businesses that I have met are not clamouring for a return to the economic chaos that we saw under Liz Truss or the 14 years of economic stagnation that his party presided over. The stability that we restored to the public finances and to the economy is an essential prerequisite for investment and growth; indeed, it is the foundation on which economic growth can succeed.

[Mr Angus MacDonald]

I am reluctant to come in on the side of the Opposition on this issue, but I can tell the Minister that my constituency has never suffered as much in my whole business career as it has since the Budget last year. National insurance increases and related increases have absolutely crucified business up there. If the Government cared to come up to the highlands and come round local businesses with me, they would be in for a real shock, but I strongly recommend that they do so.

[James Murray]

I do not recall the hon. Gentleman ever opposing extra investment in the national health service during his interventions in the main Chamber, because, of course, the decisions that we took around employer’s national insurance contributions were taken to stabilise the public finances and put our public services back on their feet. We acknowledged at the Budget last year, when we took those difficult decisions, that they would have consequences. However, we also acknowledged that no responsible Government could have let things continue as they were, or taken what we inherited from the previous Government without putting public finances back on a firm footing.

That is exactly what we have done from our first day in office. Alongside that essential work to steady the public finances, we have been removing barriers to growth by overhauling the planning system, launching a new National Wealth Fund and reforming our pension system to unlock billions of pounds. At the spending review earlier this month, we saw the Chancellor marking a key step in our growth mission by allocating substantial new capital investment to ensure that growth is felt across the country.

That investment will be further bolstered in the coming months by other reforms, including the industrial strategy published yesterday, and the 10-year infrastructure strategy published last week. A rising economic tide lifts all boats, big and small, and this Government believe that that should be the most important priority for supporting small businesses.

[Lewis Cocking]

We have all mentioned a number of businesses that think this Labour Government are taking the wrong direction. Can the Minister list the businesses in his constituency that believe that this Labour Government are taking the right direction for business growth in this country? If he lists the businesses in his constituency, we will go and ask them.

[James Murray]

I would typically ask businesses’ permission before I named them in the House of Commons, but I can reassure hon. Members that in conversations with businesses in my constituency, or indeed across the country in my role as a Minister, they understand the difficult decisions we took to restore stability to the public finances and to the economy. That is not to pretend for a moment that those decisions were not difficult and do not come with consequences, but most businesses I speak to recognise our difficult inheritance from the previous Government, and the importance of restoring stability to the public finances as an essential prerequisite for investment and growth.

What is most important is working hand in hand with businesses—whether they are small businesses in our constituencies or large businesses that operate across the country—and putting through the reforms that we know are needed. That includes making sure that the planning system is reformed, that the National Wealth Fund supports their investment, and that we are investing across the country to ensure there are jobs and growth in every part of the UK. That is what we are focused on, working in partnership with businesses, because we know how important that is.

[Jim Shannon]

Irrespective of the Windsor framework and the protocol issue, I understand that experts and businesses have suggested that the VAT threshold should be £250,000. The hon. Member for Inverness, Skye and West Ross-shire (Mr MacDonald) referred to the fact that that would enable businesses to perhaps employ one or two apprentices or extra people in their companies, and help them to focus on a strategy for growth, which I know the Minister is committed to. Are there any circumstances in which the Minister would consider a £250,000 threshold, because of the benefits that it would clearly bring to all businesses in the United Kingdom?

[James Murray]

I thank the hon. Gentleman for his question. He referred to the impact of the Windsor framework, which as he correctly pointed out, imposes an upper limit of just over £90,000 on the threshold in Northern Ireland. The Windsor framework is therefore relevant to the threshold in Northern Ireland and, by extension, to the Government’s decisions in Great Britain as well. The debate is becoming slightly wider than the question about the VAT threshold, but I can understand why that is the case. The VAT threshold—in fact, VAT as a whole—is only one of the factors in the landscape that businesses face.

Although we recognise that we have taken some difficult decisions on employer’s national insurance contributions, as I said earlier, the important point to focus on is the stability that those decisions have brought to the public finances and that they have put our public services back on their feet. Many businesses that I speak to recognise that they need their workforce to be healthy and to be able to get on a train and get to work.

Businesses need people who are coming out of school to be trained and to have the right skills to access the jobs of the future. They need the Government to create the right environment for growth, because private sector businesses will drive growth and create wealth and prosperity across the country. Businesses want a partner in Government who will provide the infrastructure, reforms and investment to enable them and everyone across our country to flourish. That is the wider context in which this debate takes place.

This debate has mostly been about the VAT threshold. It has taken a wide definition of the VAT threshold and its connected policies, but I understand why: the threshold sits within a wider context that affects small businesses. We all agree that small businesses are at the heart of all our local communities and economies, and we all want them to thrive. That is why the Government have taken steps to ensure that the tax system supports them. We have doubled the employment allowance, increased the small employers’ compensation rate, frozen the small business multiplier, introduced permanently lower business rates for smaller retail, hospitality and leisure businesses from next year, and committed to maintain the small profits rate and £1 million annual investment allowance.

The industrial strategy, published yesterday, goes even further to support small businesses, including by announcing the creation of a new business growth service that will streamline access to Government support, advice and funding for small businesses. The VAT threshold strikes a balance between keeping the majority of businesses out of VAT altogether while ensuring that we can support public services and maintain fiscal responsibility.

I thank you again for your chairmanship, Mr Vickers. I thank all hon. Members who have contributed to the debate and, in particular, I thank the hon. Member for Mid Leicestershire for securing the debate.

Business Rates Relief: High-street Businesses

James Murray Excerpts

Wednesday 4th June 2025 Westminster Hall

[The Exchequer Secretary to the Treasury (James Murray)]

It is a pleasure to speak in this debate with you in the Chair, Ms Jardine. I thank hon. Members for their warm welcome.

I want to extend my thanks, as many others have, to the right hon. Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson) for securing this debate—and, indeed, for his kind words about how I am doing my job. I thank all hon. Members for their contributions to the debate and for bringing perspectives from their constituencies to it. Although we have had a fair dose of politics, there have also, in fine Westminster Hall tradition, been moments of cross-party agreement and a desire to find a way forward to support high streets in all our constituencies.

As Members of this place, we all know how important high streets are to our constituents as centres of economic activity and places where people come together. I was glad to hear healthy competition in the claims about who has the best high street and local pubs in their constituency. [Interruption.] I am seeing further bids from the other side of the room. We all know as MPs, and indeed as members of the public in our own right, how high streets unite people. They sustain jobs and are central to the identity of the areas that we represent. That is why the Government are protecting the high street by transforming the business rates system so that it supports investment and is fit for the 21st century. I welcome this opportunity to set out our approach to making that transformation a reality.

As many hon. Members have said, retail, hospitality and leisure businesses are the backbone of our high streets—our shops, pubs and cinemas—but they are contending with changing consumer habits and have faced a series of economic headwinds in recent years, including the pandemic. Online services are undeniably convenient and offer great variety, but it is high streets that bring people together. The problem, as many hon. Members have set out, is that business rates fall more heavily on property-intensive sectors, so it is a priority for the Government to ensure that the burden is permanently rebalanced and that high street businesses are protected.

We inherited a situation in which protection for high street businesses through retail, hospitality and leisure relief was set to end altogether in April this year. That continued a pattern that had become normal under the previous Government; ratepayers would rightly complain that the fact that RHL relief ended every year by default created an annual cliff edge for RHL businesses. What was supposed to be a temporary, stopgap measure was extended year by year following the pandemic by Conservative Governments, who made no attempt to fix the system and give businesses the certainty and stability they need.

That is why at last year’s autumn Budget we announced our intention to change how this is done, by introducing permanently lower tax rates for RHL properties with rateable values below £500,000 from 2026-27. That will give much needed certainty and support to the high street, improving investment and growth in places across England. We intend to introduce two lower RHL multipliers to mirror the existing national small business and standard multipliers. The new small business RHL multiplier will apply to RHL properties with rateable values below £51,000, and the new standard RHL multiplier will apply to RHL properties with rateable values of £51,000 and above, and below £500,000. Those lower multipliers will apply to all RHL properties with rateable values below £500,000. We will have no cash cap per business as the previous Government’s relief had, meaning that all relevant properties will be able to benefit from our approach.

Under our Government, any tax cut must be paid for. We saw what happened when the previous Government ignored that rule. That is why we intend to fund this tax cut by introducing a higher rate for properties with rateable values of £500,000 and above. Those properties represent less than 1% of all properties, but include the majority of large distribution warehouses, including those used by the online giants.

The Government recognise that business rates form a significant part of the costs of some businesses, but we must make difficult choices to ensure that our plans to support the high street are sustainable. That is why we are asking those occupying the most valuable properties to contribute more to support the vitality of the high street.

The rates for new multipliers will be set at the Budget 2025, so that the Government can factor in the upcoming revaluation outcomes and broader economic and fiscal contexts into the decision making. The Non-Domestic Rating (Multipliers and Private Schools) Act 2025 gives Government flexibility in the creation of the new multipliers and their rates within appropriate guardrails, so that the Government do not have unfettered powers. The rate for any higher multiplier cannot be more than 10p higher than the national standard multiplier, while the lower RHL multipliers cannot be less than 20p lower than the national small business multiplier. I emphasise to Members that those are only guardrails, not the intended rates, and the final decisions on the multipliers will be made at Budget in the autumn.

The Government recognise that RHL businesses need support in 2025-26, ahead of the permanently lower tax rates being introduced for 2026-27. Hon. Members today have spoken about the impact of changes to RHL relief on high street businesses in their constituencies, but it is worth emphasising again that without any Government intervention, RHL relief would have ended entirely in April 2025. To avoid that happening, our Government decided to provide a 40% business rates discount to RHL properties up to the cash cap of £110,000 per business in 2025-26.

[Sir Gavin Williamson]

Will the Minister assure us that, given the cross-party agreement in the Chamber today, he will go back to the Treasury and make representations to see if that could be increased to 75% for the intervening year? It would be a great relief not just on finances but on the mental worry of so many businesses if they knew that someone in the Treasury was battling for the return of that 75% relief.

[James Murray]

The permanently lower tax rates will come in in April 2026, so the intervening year is the year that we are currently in. That rate has been set by the Chancellor. The Chancellor makes announcements about rates at fiscal events. The autumn Budget is where she sets out those rates, in the same way that she agreed, at the autumn Budget last year, what the rate would be for RHL relief for the current year, 2025-26. At the autumn Budget this year, she will set out what the permanently lower rates will be thereafter. I would say to businesses looking at their finances this year that from April ’26—from the next financial year—the permanently lower rates will come in. Indeed, it will benefit a broader variety of shops on the high streets, because we are not continuing the cash cap of £110,000 per business.

[Mr Mohindra]

One of the likely consequences of the Minister’s proposals is that tenants will look to change their rateable value. Can he assure the House that the Valuation Office Agency will have sufficient resources to ensure that any appeals are done as quickly as possible to give the certainty that our high street retailers and hospitality deserve?

[James Murray]

I thank the hon. Gentleman for raising the issue of the VOA. Its performance is very important for businesses across the country. I am sure that he will have seen our recent announcement that, this year, we are bringing the VOA into His Majesty’s Revenue and Customs, rather than it being an arm’s length body. Part of that is to save on administration costs—to protect the public finances—but it is also to ensure that we can work with it to improve its service as much as possible, to give the best and quickest possible service to businesses involved. I reassure the hon. Gentleman that VOA performance is very high on our agenda.

Hon. Members raised the impact of RHL relief on pubs, which is understandable, given the particular importance of pubs in all our local communities. Indeed, we had a competition for who has the best pub in their constituency. I will just about resist the temptation to list the pubs in my constituency, as I am here as a Minister rather than with my constituency hat on, but hon. Members should pop into the Duke of Kent if they are ever in Ealing North. To put this in context, the extension of RHL relief for this year under this Government is saving the average pub with a rateable value of £16,800 more than £3,300. That is a real, meaningful difference to pubs across the country. The Government have, of course, frozen the small business multiplier for this year as well. Taken together with small business rates relief, more than 1 million properties have been protected from inflationary increases in their bills this year.

Some hon. Members, including the right hon. Member for Stone, Great Wyrley and Penkridge, have argued that the RHL relief in this year should be higher. However, given the Government’s fiscal inheritance, it was not fiscally sustainable to continue the 75% relief, which cost £2.4 billion a year. Crucially, to repeat remarks I have made several times now, our approach from April 2026 will mean no more use of an indefinite stopgap measure. Our approach will instead offer permanently lower tax rates and the stability that those bring for businesses.

The Budget announcements and the changes I have just described reflect the Government’s first steps to support the high street. We want to go further, and modernise the business rates system. At the autumn Budget last year, the Chancellor therefore announced the publication of a discussion paper that sets out priority areas for reform.

[Suella Braverman]

The Minister says that he cannot afford the £2 billion price tag of maintaining the relief introduced by the last Conservative Government. How, then, is he paying for the £30 billion surrender deal in which this Government are giving up sovereign territory, the Chagos islands, to Mauritius?

[James Murray]

I would challenge the right hon. and learned Lady’s use of language, but that issue is rather outside the scope of a debate on business rates.

As I was saying, we published a discussion paper at the Budget last year, which invited the industry to help us to design a fairer business rates system that supports investment and is fit for the 21st century. Since publishing the paper last autumn, my officials and I have met more than 250 stakeholders across a range of sectors, including RHL and local government, and have received submissions from a range of businesses, including those from the constituencies of hon. Members present today. We are analysing the responses in detail, and the data and views shared by businesses will inform the business rates policy development process. In the summer, we will publish an interim report that sets out a clear direction of travel for the business rates system, with further policy detail to follow at the autumn Budget 2025.

It is worth my briefly drawing hon. Members’ attention to the fact that, beyond the business rates system, the Government are taking other steps to rejuvenate our high streets. We are introducing high street rental auctions to revitalise our high streets and tackle empty properties, which we know can fuel a spiral of decline in town centres. Through the English devolution Bill, the Government will introduce a new community right to buy to help communities to safeguard valued community assets. That will empower local communities to bring assets such as empty shops, pubs and community spaces into community ownership, helping to revitalise our high streets and eliminate vacant properties.

Alongside that, the new £1.5 billion plan for neighbourhoods programme will deliver up to £20 million of funding and support over the next decade to 75 communities across the UK, laying the foundation to kick-start local growth and drive up living standards. As part of the programme, local partnerships will be able to fund interventions focused on revitalising high streets. The Government will announce further plans to support high streets in the small business strategy later this year.

As we have heard, hon. Members are rightly concerned about the high streets in their constituencies. We are all passionate about the places where we live and that we represent, and we want them to thrive. As I have set out, the business rates system that this Government inherited has been failing to give high streets the long-term, certain and stable support they need, instead providing only stopgap help through RHL relief that has kept changing and has been repeatedly extended ahead of an annual cliff edge.

This Government are fixing the foundations of the business rates system, and that starts with permanently rebalancing the burden of RHL properties through introducing permanently lower tax rates from 2026-27.

[Stuart Anderson]

I really like the idea of permanently lower tax rates. Can the Minister confirm that that is for all businesses, and that no businesses will receive tax rises?

[James Murray]

I thank the hon. Gentleman for his question. As I set out, the new lower multipliers of RHL properties will apply to all RHL properties with rateable values below £500,000. There will be a standard RHL multiplier and a small RHL multiplier for properties with rateable values of £51,000 and below. The definition of an RHL property will broadly follow the definition by which RHL relief is currently allocated. That will be set out in guidance, but hon. Members can expect that to operate in a similar way.

The advantage of our approach of permanently lower tax rates and multipliers is that they do not have a cap in the way that the previous Government’s relief did, of £110,000 per business. All properties within the RHL definition with rateable values of less than £500,000 will be able to benefit from this support, helping all the shops that contribute towards high streets across the country.

Beyond the changes to the RHL multipliers, I have also had the chance to set out some of the wider work that we are undertaking to transform business rates over the course of this Parliament and create a fairer, modernised system that is fit for the 21st century. I thank the right hon. Member for Stone, Great Wyrley and Penkridge and all hon. Members who have contributed to the debate.

Inheritance Tax: Family-owned Businesses

James Murray Excerpts

Tuesday 3rd June 2025 Westminster Hall

[The Exchequer Secretary to the Treasury (James Murray)]

It is a pleasure, Sir John, to speak in this debate with you as Chair, and I congratulate the hon. Member for Mid Dunbartonshire (Susan Murray) on securing it—I notice that the debate is being opened and closed by a Murray.

I know that some Members are very concerned about the impact of forthcoming reforms to inheritance tax reliefs on businesses in their constituencies, and I understand that people feel very strongly about inheritance tax. I should be clear that the Government believe that our reforms to business property relief and agricultural property relief get the balance right between supporting farms and businesses and fixing the public finances in a fair way. The reforms reduce the inheritance tax advantages available to owners of agricultural and business assets, but still mean that those assets will be taxed at a much lower effective rate than most other assets.

Let me make clear that, much like the hon. Lady set out, the Government recognise and greatly value the huge contribution that small and family-owned businesses make to their communities and the economy. Businesses large and small, including family businesses, will create jobs and wealth and be the engines of growth in the economy. Those businesses and their workforces are the backbone of our economy, and they are fundamental to kickstarting economic growth, which is the Government’s No. 1 mission. Those businesses need a Government who will take the right decisions in the national interest, including when they are difficult, to support our security and prosperity.

People who own, run and work in businesses of all sizes will remember the economic context that we inherited last year. They know how important responsible financial management is within their own businesses and how the success of businesses and their workforces depends on economic stability and public services that function well. I believe that many of them will understand that, since taking office, the Government have taken a number of difficult but necessary decisions on tax, welfare and spending to restore economic stability, fix the public finances and support public services. None of these decisions, including the decision to reform agricultural property relief and business property relief, was taken lightly, but those tough decisions were left to us by the previous Administration, and no responsible Government could have let things carry on as they were.

Alongside our work to stabilise the economy and restore discipline to the public finances, the Government are determined to do everything we can to support businesses to grow. We are overhauling the UK’s regulatory system to reduce burdens on businesses by 25% by the end of this Parliament. We have secured trade deals that will slash the cost of doing business abroad, reduce border checks, cut tariffs and axe red tape. Those trade deals will support jobs and create opportunities for Great British businesses in our biggest current markets and in one of the world’s biggest future markets, too.

The Government expect to publish an SME strategy later this year. It will set out the Government’s vision for SMEs, from encouraging entrepreneurship to boosting scale-ups across key policy areas, such as creating thriving high streets, making it easier to access finance, opening up overseas and domestic markets, building business capabilities and providing a strong business environment.

Despite the tough fiscal inheritance at the election last year, we have also taken decisions to continue supporting small businesses through the tax system. We have chosen to increase the employment allowance to £10,500 to take many small businesses out of paying national insurance contributions altogether. We froze the small business rates multiplier to protect small properties from inflationary bill increases, and we will introduce permanently lower business tax rates for small retail, hospitality and leisure businesses from 2026.

[Anna Gelderd (South East Cornwall) (Lab)]

In rural and coastal communities such as South East Cornwall, family-run businesses and farms are the backbone of the local economy. Does the Minister agree that any changes to inheritance tax must be carefully shaped to support our local businesses and farms to plan for their future so that they can pass on their hard-earned success?

[James Murray]

My hon. Friend is a great champion of businesses and farmers in her constituency. When we were deciding how to reform agricultural property relief and business property relief, we made sure that generous tax reliefs still existed in the tax system precisely because we want to continue to support small and family-owned farms and businesses in particular. I will come to those in a moment.

I am conscious that you asked me to give you a few moments at the end, Sir John. Do you mean at the end of my remarks?

[Sir John Hayes (in the Chair)]

I need about 15 seconds at the very end of your remarks.

[James Murray]

Got it. To conclude my remarks on the wider support that we are giving to businesses, I also draw hon. Members’ attention to the fact that we committed in the “Corporate Tax Roadmap”, which was published at the autumn Budget, to maintain the small profits rates and marginal relief at their current rates and thresholds, as well as the £1 million annual investment allowance.

I know that many Members are concerned about the reforms to inheritance tax that are the subject of the debate, so I will now turn to them. The reality is that the full, unlimited relief introduced in 1992 has become unfair and unsustainable, particularly in the economic context that we inherited. Under the current system, the 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates, which is clear from the latest HMRC data from 2021-22. More than 50% of business property relief was claimed by just 4% of estates making claims. That means that the wealthiest few per cent of estates claimed £558 million in tax relief. That contributes to the very largest estates paying a lower average effective inheritance tax rate than smaller estates. It is neither fair nor sustainable to maintain such a large tax break for such a small number of claimants, given the wider pressures on the public finances. It is for that reason that the Government are changing how we target agricultural property relief and business property relief.

Under the reformed system, estates will still benefit from 100% relief for the first £1 million of combined assets from April 2026, and on top of that there will be an uncapped 50% relief on further assets. That means that inheritance tax will be paid at a reduced effective rate of up to 20%, rather than the standard 40%. Those reliefs sit on top of the standard nil-rate bands and other exemptions, such as transfers between spouses and civil partners.

[Susan Murray]

Why do the Government not consider taxing large digital multinational corporations trading in this country in order to raise the extra revenue that is being raised from this measure, which effectively punishes the businesses that run the supply chains that export to those markets? Those businesses have relationships with specialist suppliers and are being put at risk.

--- Later in debate ---

[James Murray]

I believe that the hon. Lady is asking about the taxation of large multinational firms operating in the digital space. I am sure that she is aware of the digital services tax, which is currently in operation. The Government are committed to maintaining that until the pillar 1 international solution is implemented, and I am sure that she is familiar with pillar 2 of the OECD deal on a global minimum corporate tax rate. Large multinational firms are well dealt with on the international level, which is why, in opposition and in government, we have supported the OECD’s two-pillar solution.

I do not want to be distracted from the design of the reforms that we are talking about today. Where inheritance tax is due, those liable for a charge can pay any liability on the relevant assets over 10 annual interest-free instalments. That benefit is not seen anywhere else in the inheritance tax system.

There has been a lot of discussion of the impact of this policy, so let me set out the numbers, based on HMRC claims data. It is expected that, under these reforms, about 1,500 estates claiming only business property relief will pay more inheritance tax in 2026-27. Two thirds of those estates—about 1,000—are expected to only hold shares designated as not listed on the markets of recognised stock exchanges, such as the alternative investment market. Under these reforms, about three quarters of estates claiming business property relief in 2026-27, excluding estates only holding shares designated as not listed, will not pay any more inheritance tax in 2026-27.

The reforms to relief have generated a lot of commentary about the wider impacts, but hon. Members should take care when relying on analysis based on self-selecting surveys from members of representative groups campaigning against the reforms. Indeed, the independent Office for Budget Responsibility is clear that it does not expect this measure to have any significant macroeconomic impacts, and it certified the costing at autumn Budget 2024. It said that the reforms to agricultural property relief and business property relief are forecast to raise a combined £520 million in 2029-30.

[Richard Baker (Glenrothes and Mid Fife) (Lab)]

I recognise the need for the Government to raise funds, given the economic context that they inherited, but, as my hon. Friend the Member for Dunfermline and Dollar (Graeme Downie) said, a number of family businesses have come forward with alternative proposals that would raise the funds in a different way. Would the Minister and his team be prepared to meet and consult with family businesses to ensure that they have input into the plans? That would enable those businesses to inform them of their experiences and raise alternative proposals that might raise funds differently.

[James Murray]

I reassure my hon. Friend that I, and the wider team of officials, have had a number of meetings with representatives of family businesses and the agricultural and farming sector. We have listened to ideas raised by a number of people we have met, as well as ideas raised in debates in the Commons and in meetings in the Treasury and elsewhere. We have listened, but we remain confident that our approach is a fair way to balance supporting farms and businesses with fixing the public finances, so we stand by our reforms.

I should probably conclude. I thank all hon. Members, particularly the hon. Member for Mid Dunbartonshire, for their contributions to the debate.

Question put and agreed to.