Political Explainers

Budget 2026 Explained: What Healey Announced and Who Pays

Budget 2026 explained: Healey’s £100 energy payment, tax rises for savers, landlords and banks, a record 37.9% tax burden, and who really pays.

Your vote

Should Healey have cut welfare instead of taxing savers and landlords?

Matt · 29 Oct 2026 · 12:00 · 11 min read · 669 reads

A worn red leather briefcase on a wooden desk beside a stack of banknotes, pound coins and a calculator

By Matt, Editor

Budget 2026 explained: on Wednesday 28 October, Chancellor John Healey delivered his first Budget. He handed out a one-off £100 energy payment and froze fuel duty for another six months, but raised taxes on savers, landlords, banks and business owners. The official forecaster says the tax burden will hit a record 37.9% of GDP next year and borrowing is higher than planned.

This explainer sets out what was announced, who pays, what the Office for Budget Responsibility (OBR) said, how the opposition and the experts reacted, and what happens next. Every figure comes from the Treasury, the OBR or a named source. Passages marked Our view are opinion.

Key facts

Chancellor John Healey delivered his first Budget on 28 October 2026 (source: HM Treasury).
A one-off £100 Household Energy Payment goes to up to 20 million households in council tax bands A to D in England this winter, at a cost of £2.6bn (source: HM Treasury).
Income tax on savings and property income rises by 2 points to 24%, 44% and 49% from 6 April 2027 (source: HMRC).
The bank surcharge doubles from 3% to 6% for 15 months, from 1 January 2027 to 31 March 2028 (source: HMRC).
The OBR forecasts the tax burden at a record 37.9% of GDP in 2027-28, rising to 38.6% by 2031-32 (source: OBR).
Headroom against the main fiscal rule is £15bn in 2029-30, and Budget measures add £8bn to borrowing this year (source: OBR).

What did Healey announce in Budget 2026?

The Chancellor called it a Budget of “breathing space for today, hope for the future”, according to the Treasury. In practice it was a handful of short-term giveaways on energy and fuel, paid for by higher borrowing now and a set of targeted tax rises that bite from 2027. The headline income tax, National Insurance and VAT rates were not changed, but the freeze on income tax and National Insurance thresholds stays in place until 2031, according to the OBR and HMRC.

Have your sayTap to comment

Area	What was announced	Source
Energy bills	£100 one-off Household Energy Payment for up to 20m households in bands A–D in England (£2.6bn). 0% VAT on household electricity extended to 30 June 2027, worth about £50 off the price cap. Gas standing charges to be abolished via Ofgem; the hydrogen levy scrapped	HM Treasury; HMRC
Fuel duty	5p cut extended to 30 June 2027. On 1 July 2027 rates return to pre-2022 levels and rise with RPI	HMRC
Savings and property income	Tax rates up 2 points to 24% / 44% / 49% from 6 April 2027. Cash ISA limit kept at £20,000	HMRC
Income tax and NI thresholds	No change: thresholds stay frozen until 2031	OBR; HMRC
Banks	Bank Corporation Tax surcharge up from 3% to 6% from 1 January 2027 to 31 March 2028, raising about £1.5bn	HMRC; HM Treasury
Business owners	Business Asset Disposal Relief lifetime limit halved from £1m to £500,000 from April 2027. New Founders’ Relief: lower capital gains tax rate for qualifying founders	HMRC
Business investment	First-year allowance up from 40% to 50% from January 2027; main writing-down allowance cut from 14% to 12% from April 2027	HMRC
Small firms and side hustles	Trading allowance tripled from £1,000 to £3,000. Small business rates relief threshold for shops, pubs and leisure raised from £12,000 to £18,000	HMRC; HM Treasury
Gambling and online sales	Machine Games Duty on higher-stake machines up from 20% to 25%. Online marketplaces to collect VAT for UK sellers from October 2027	HMRC
North Sea	A new permanent 35% Oil and Gas Revenue Levy on “exceptional” revenues once the Energy Profits Levy ends	HMRC
Pay	National Living Wage up 3.9% to £13.21 an hour from April 2027	HM Treasury
Pensions	Pension Tax Allowance from April 2027: pensioners whose total income is no more than the full new State Pension pay no income tax. Triple lock to be adjusted from 2030, as already announced by the Prime Minister	HMRC; HM Treasury
Welfare	No major savings announced. £1.4bn from fraud and error over 2027-32 and more face-to-face assessments; a welfare White Paper promised before the end of the year	HM Treasury
Defence	£15bn Defence Investment Plan funded, including a £4.7bn gap. Spending of 2.7% of GDP in 2027-28; detail on reaching 3% left to next year’s Spending Review	HM Treasury
Ukraine	More than £10bn of extra support, mostly loans and guarantees, including £0.5bn of military aid	HM Treasury
Housing	£1.5bn extra for social and affordable homes; a First Time Buyer ISA to replace the Lifetime ISA for new savers	HM Treasury; HMRC
Borrowing	Budget measures add £8bn to borrowing in 2026-27 and £4bn in 2027-28; borrowing is 4.2% of GDP (£133bn) this year	OBR
OBR verdict	Record tax burden of 37.9% of GDP in 2027-28; growth cut to about 1% in 2027; headroom £15bn	OBR

Sources: HM Treasury Budget 2026 speech and press release; HMRC Overview of Tax Legislation and Rates; OBR Economic and Fiscal Outlook, October 2026. Compiled by Breaking Brexit News.

The Chancellor also cut tariffs on more than 100 everyday products, as we reported in our story on the tariff cuts, and confirmed the extra money for Ukraine covered in our report on the £10bn Ukraine package.

Who pays for Budget 2026?

Savers and landlords. From April 2027 a basic-rate taxpayer will pay 24% on savings interest above their allowances and on rental profits, up from 22%. Higher-rate payers will pay 44% and additional-rate payers 49%, according to HMRC. The Treasury says most taxpayers will not be affected. Tax Policy Associates says it is mainly people with savings outside an ISA and landlords who will notice.

Banks and their customers. The bank surcharge doubles to 6% for 15 months, raising about £1.5bn, according to the Treasury. LBC reported that banks and energy firms are expected to pass the tax rises on to customers. We set out the background in our report on the bank tax plan.

Family firms and founders. The lifetime limit on Business Asset Disposal Relief halves to £500,000, so more people selling a business will pay the full rate of capital gains tax. See our report on the family business tax raid.

Every worker, by stealth. Thresholds stay frozen, so pay rises pull more people into tax and into higher bands. The OBR says frozen thresholds and higher earnings are a key reason why living standards fall slightly in the near term.

Drivers, from July 2027. The 5p fuel duty cut has been extended again, but HMRC’s documents confirm that on 1 July 2027 rates go back to their pre-2022 levels and then rise with RPI inflation.

Our view: the £100 payment is a one-off. The higher tax on savers and landlords, the higher fuel duty from next summer and the frozen thresholds are not. Labour is taxing the prudent to pay for a welfare bill it still refuses to tackle.

What did the OBR say about Budget 2026?

The Office for Budget Responsibility’s Economic and Fiscal Outlook says the UK’s economic and fiscal position “remains very challenging”. Higher energy prices and interest rates since March leave borrowing higher in every year of the forecast, by about £18bn this year and £16bn in 2027-28. Healey’s own measures add £8bn to borrowing in 2026-27 and £4bn in 2027-28 before tax rises reduce it later in the decade.

The OBR expects growth of around 1¼% this year and about 1% in 2027, roughly half a point lower than in March. CPI inflation peaks at about 3¾% in early 2027. Real household disposable income per person, its measure of living standards, falls slightly in the near term and in 2030-31 is only about 2% above pre-pandemic levels. The OBR’s David Miles called it “a pretty grim picture”, according to The Independent.

The tax burden hits a record 37.9% of GDP in 2027-28, above the previous post-war high, and keeps rising to 38.6% by 2031-32. Debt interest rises from £124bn in 2026-27 to £160bn in 2031-32. The Chancellor meets his main fiscal rule by £15bn in 2029-30, a thinner margin than in March.

Measure	Figure	Source
Tax burden (tax-to-GDP)	37.9% in 2027-28, a record; 38.6% in 2031-32	OBR, October 2026
Borrowing	4.2% of GDP (£133bn) in 2026-27, falling to 1.8% (£67bn) in 2030-31	OBR, October 2026
Public sector net debt	Peaks at about 97% of GDP in 2028-29	OBR, October 2026
Debt interest	£124bn (2026-27) rising to £160bn (2031-32)	OBR, October 2026
Headroom against the main fiscal rule	£15bn in 2029-30	OBR, October 2026
GDP growth	About 1¼% in 2026; about 1% in 2027	OBR, October 2026
CPI inflation	Peak of about 3¾% in early 2027; 3½% average in 2027	OBR, October 2026
Income tax thresholds	Frozen until April 2031	OBR; HMRC

Source: Office for Budget Responsibility, Economic and Fiscal Outlook, October 2026; HMRC. Compiled by Breaking Brexit News.

A pile of unopened envelopes, pound coins, a mug of tea and a calculator on a kitchen table — AI-generated illustration: household bills on a kitchen table.

How did Reform UK, the Conservatives and Leave voices react?

Reform UK’s Treasury spokesman Robert Jenrick said: “This was a do-nothing Budget. It was a nothingburger.” He added: “Britain is broke and British people feel broken right now,” and on the energy payment: “£100 once is not an answer to this problem,” The Independent reported.

Nigel Farage called it “a retail Budget aimed at an early general election” and “a very deeply cynical agenda aimed at a general election and hiding the truth from everybody that they are all going to get poorer in every single year of the Labour Government”, according to The Independent. He said he was shocked by the size of the Ukraine package.

Before the Budget, Reform set out £40bn of savings in its first year, including £20bn from welfare, £8bn from net zero schemes and £6bn from foreign aid. It says this would pay for a £15,000 tax-free personal allowance and save households around £1,300. See our report on Reform’s growth plan and our Reform UK policies explainer.

Conservative leader Kemi Badenoch told MPs that after Labour promised to end “40 years of neoliberalism”, the result was “4p off gherkins”. “Is that it? Really, is that it?” she said, LBC reported. She said the Budget offered “more borrowing, more tax rises, and surprise, surprise, more money on benefits”.

On Brexit, GB News reported that Healey did not blame Brexit for weak growth and “stopped short of echoing Andy Burnham” on the issue. Instead he put higher prices down to the Middle East conflict. GB News also noted that Eurosceptics hail the VAT cut on household energy as a Brexit benefit. Lib Dem leader Sir Ed Davey still blamed the “Conservative Brexit deal”.

The Institute for Fiscal Studies said “the Chancellor has chosen to accept higher borrowing”, and described the package as “a raft of fiddly measures but very little that will move the dial on growth”. It warned that the “temporary” fuel duty and VAT cuts may prove hard to end, said the £100 payment relies on the “outdated” council tax system, and said next year’s Spending Review will be the crunch point for defence.

A government building in Whitehall — AI-generated illustration: a government building in Whitehall.

What do supporters and critics say?

The case for

The Chancellor says the Budget gives families “breathing space” and keeps the fiscal rules, according to the Treasury. Supporters point to the £100 energy payment, the longer VAT and fuel duty cuts, more rates relief for high-street firms, the higher trading allowance and the Pension Tax Allowance. They also note that the headline rates of income tax, National Insurance and VAT were left alone.

The case against

Our view: this is a Budget that borrows now and taxes later. The OBR confirms a record tax burden and a smaller safety margin, and Labour has again ducked welfare reform by waiting for more reports and a White Paper. Savers, landlords, banks and business founders are being squeezed to pay for it, and frozen thresholds keep dragging workers into higher bands. Voters were already unconvinced, as polling on Andy Burnham’s first 100 days shows, and councils face their own black hole, with council tax arrears in England at £7.4bn.

Why does Budget 2026 matter for you?

If you are in council tax bands A to D in England, expect £100 off your energy costs this winter. If you have savings outside an ISA or rent out property, you will pay more tax from April 2027. If you drive, fuel duty goes up in July 2027. If you are a pensioner living on the State Pension alone, you should not pay income tax from April 2027. And if you run a family firm or plan to sell one, the smaller Business Asset Disposal Relief allowance could cost you thousands.

What happens next?

MPs debate the Budget over four days, with the Shadow Chancellor responding on Thursday 29 October, according to UK Parliament. The tax measures go into the Finance Bill 2026-27. The Treasury says the Milburn and Timms welfare reports are due next month, with a welfare White Paper before the end of the year and legislation next year. The Spending Review next year will set out how defence reaches 3% of GDP.

Frequently asked questions

When was Budget 2026?

Chancellor John Healey delivered Budget 2026 to the House of Commons on Wednesday 28 October 2026.

Who delivered the Budget?

John Healey, the Chancellor of the Exchequer. It was his first Budget in the role.

Did income tax, NI or VAT go up?

The main rates did not change. But tax on savings and property income rises by 2 points from April 2027, and income tax and National Insurance thresholds stay frozen until 2031.

Who gets the £100 energy payment?

Up to 20 million households in council tax bands A to D in England, paid this winter, according to the Treasury.

What did the OBR say?

It forecasts a record tax burden of 37.9% of GDP in 2027-28, growth of about 1% in 2027 and headroom of £15bn against the main fiscal rule.

When do the changes take effect?

Some measures applied from Budget day. Most tax changes start in January or April 2027, and fuel duty rises from 1 July 2027.

What is in Reform UK’s alternative Budget?

Reform has proposed £40bn of savings in its first year, including £20bn from welfare, £8bn from net zero and £6bn from foreign aid, to fund a £15,000 personal allowance and cuts to energy and fuel costs.