Budget 2026: What it means for you

Chancellor John Healey has delivered his long-awaited Budget - his first as chancellor.

With the Iran crisis pushing up prices and threatening to send them even higher, giving people “breathing space” was Mr Healey’s big priority.

So what has he announced that might make a difference to you and your household?

Extending the VAT cut on electricity bills

Earlier this month, the government scrapped VAT on household electricity bills until March.

This is now being extended to July, taking £50 off the annual price cap.

Gas bills on standing charges to be scrapped

The PM said last week that the government will look at scrapping standing charges on gas bills.

And now it’s been confirmed this will come into effect next year. 

The government believes this will save 60% of households about £45 on average a year.

It does mean the cost will be added to the unit price, but it also means you’ll only be charged for the gas you actually use.

At the moment, the average standing charge for gas is 29.7p a day.

The chancellor also announced that the government plans to set out "similar reforms" for electricity.

£100 energy payment for households

Households in council tax bands A to D in England will receive a £100 energy payment.

This will be paid directly into bank accounts to help them with rising energy bills.

The chancellor believes this will benefit about 20m households and will be funded by a temporary increase in taxes for banks.

Fuel duty to be frozen

Fuel duty will remain at its current rate until July. 

It’s been frozen at 53p a litre since March 2022.

That would offer some small relief to motorists who’ve seen prices at the pumps soar in recent months.

According to the RAC, a litre of petrol now costs 173.45p a litre on average, and diesel costs around £198.96p per litre.

National living wage to increase

The national living wage is to rise by 3.9% from £12.71 to £13.21 in April 2027.

Meanwhile, the rate for younger workers will go up to £11.27.

Ending the ‘cliff-edge’ for people getting carer's allowance

If you get carer’s allowance and earn even a penny over the weekly earnings limit, you lose the whole payment. 

So the government is changing the system to remove this cliff edge, where your carer’s allowance will instead go down by £1 for every £1 you earn over the limit.

The new taper for carer’s allowance starts in 2030-31.

Removing import taxes on more than 100 popular groceries

The government is removing import taxes on more than 100 products, including baked beans, chocolate, garlic and gherkin.

Pensioners on low incomes to be shielded from income tax

A new personal allowance will be introduced for retirees on low incomes that will mean they won’t have to pay any tax out of their state pension.

About a million pensioners look set to benefit from the changes.

The state pension is set to rise by 3.9% to £13,036.40 a year from April 2027, which would take it above the existing £12,570 personal tax allowance.

Cash ISA allowance cut reversed

In last year’s Budget, then-chancellor Rachel Reeves announced that from April 2027, the cash ISA allowance would be cut by £8,000, except for over-65s, with this money instead designated for investment.

But Mr Healey has reversed this plan, so people can continue to save up to £20,000 tax-free either in a cash ISA or a stocks and shares ISA.

Extending parental pay

From April 2029, parental pay will be extended to more than 150,000 additional parents per year, including self-employed dads and partners who have typically missed out.

Eligible parents will receive two weeks of support, worth up to £194 a week.

Statutory paternity pay in the UK is £184.03 per week.

More support with motoring costs for people who drive for work

High tax-free mileage rates for employees and self-employed people who use their own vehicle for work will be made permanent.

They’ll be able to continue receiving up to 55p per mile tax-free for the first 10,000 business miles, and the rate for those who drive over 10,000 miles will be increased from 25p to 35p a mile.

The government believes this will benefit around 3m people who use their own vehicle for work.