Chancellor John Healey has announced help with energy bills, a higher minimum wage and support for high street businesses in his first Budget, alongside increases in some taxes.
The measures unveiled today, Wednesday 28 October, include a £100 energy payment for up to 20 million households in council tax bands A to D in England in 2027. Funding will also be provided for similar support elsewhere in the UK. The temporary VAT cut on electricity bills will continue until 1 July 2027.
The government will ask Ofgem to remove gas standing charges and transfer their costs to unit prices. This means the costs would be collected through the amount of gas used, rather than a fixed daily charge, and would not automatically mean lower bills for every household.
Workers aged 21 and over will see the National Living Wage rise by 50p to £13.21 an hour from April 2027, an increase of 3.9%. The minimum rate for workers aged 18 to 20 will increase from £10.85 to £11.27.
Drivers will retain the temporary 5p fuel duty cut until July 2027. Changes to mileage allowances will also increase the tax-free rate for work journeys above 10,000 miles from 25p to 35p a mile from April.
Plans to reduce the annual cash ISA allowance for under-65s have been reversed, keeping the limit at £20,000. However, tax rates on savings and property income will rise by a further two percentage points from April 2027, on top of increases announced in the previous Budget. Income tax rates on earnings remain unchanged.
For qualifying retail, hospitality and leisure properties in England, the rateable value threshold for full Small Business Rates Relief will rise from £12,000 to £18,000 in April 2027. Tapered relief will extend to £21,000.
Housing announcements include an additional £1.5 billion for social and affordable homes and a £4.7 billion Your First Home scheme offering eligible first-time buyers 20% equity loans. A new First Time Buyer ISA is planned for April 2029, with annual contributions of up to £4,000 and a 25% government bonus towards a qualifying purchase.
The Budget package also includes plans to remove the Carer’s Allowance earnings cliff-edge from 2030-31. Under the current system, exceeding the earnings limit can mean losing the entire benefit. Support for self-employed new parents and loans for home energy improvements were also announced.
Banks will help fund household support through a temporary increase in the Bank Corporation Tax Surcharge from 3% to 6%, lasting 15 months until 31 March 2028.
The announcements came against a weaker economic outlook. The Office for Budget Responsibility forecasts growth of 1.2% this year and 1% in 2027, with next year’s forecast downgraded as the conflict in the Middle East puts pressure on energy costs and living standards.
