The Budget published on 28 October 2026 focuses its help for households on energy bills and motoring costs. Up to 20 million households in England will get a £100 energy payment, domestic electricity stays VAT-free until July 2027, and drivers keep the 5p fuel duty cut for another six months. Income tax rates on earnings are unchanged, but people with savings or rental income outside tax-free allowances will pay more from April 2027.
This piece sets out what the Budget means for household finances, and what to watch next.
At a glance
- Energy payment: a £100 Household Energy Payment for up to 20 million households in council tax bands A to D in England, from January 2027.
- Electricity VAT: the 0% VAT rate on domestic electricity is extended to 1 July 2027, expected to take around £50 off the annual Ofgem price cap in April 2027.
- Gas standing charges: Ofgem has been asked to abolish them, aiming for the end of 2027.
- Fuel: the 5p per litre fuel duty cut is extended to 1 July 2027, and the planned inflation rise is deferred to the same date.
- Wages: the National Living Wage rises 3.9% to £13.21 an hour from 1 April 2027.
- Savings and property income: tax rates rise by two percentage points from 6 April 2027, though the government says 84% of income tax payers will be unaffected.
- First-time buyers: a new Your First Home equity loan scheme for around 70,000 households in England, with first loans from April 2027.
- Pensioners: a new Pension Tax Allowance from April 2027 means pensioners with income at or below the full new State Pension will not be brought into paying tax by State Pension rises in this Parliament.
Energy bills
The Budget says the conflict in the Middle East has pushed up energy bills, and offers short-term help alongside longer-term reform.
Help this winter and next spring
| Measure | What it means | When |
| Household Energy Payment | £100 for households in council tax bands A to D in England, up to 20 million households. The Budget describes it both as a payment directly into bank accounts and as a council tax rebate, delivered by local authorities. Devolved governments receive funding to support households elsewhere in the UK. | From January 2027 |
| VAT on domestic electricity | The 0% rate, introduced on 1 October 2026, is extended by three months, expected to take around £50 off the annual Ofgem price cap in April 2027 | To 1 July 2027 |
| Local authority support | A further £100 million for local authorities to give targeted help to households hit hardest by rising energy bills | From January 2027 |
To help fund this energy support, the Bank Corporation Tax Surcharge is temporarily doubled from 3% to 6% for 15 months from 1 January 2027.
Longer-term changes
- Gas standing charges: these average £108 a year for a typical billpayer. The government has asked Ofgem to abolish them on domestic bills in Great Britain, aiming for the end of 2027 or as soon as possible after, with costs recovered through unit rates instead. The Budget accepts that some households may be less able to benefit and promises targeted mitigation.
- Electricity standing charges: to be reformed, with details next year.
- Energy debt: household energy debt has almost tripled to over £5 billion. A new strategy, including a one-off targeted debt relief scheme launching next year, is expected to save a typical household almost £30 by 2030.
- No new policy costs: none will be added to bills until a Cost Control Framework is in place at the 2027 spending review, unless they bring bills down or are essential for security of supply.
- Hydrogen levy scrapped: the planned Gas Shipper Obligation will not go ahead, so the government rather than billpayers will fund hydrogen projects.
- Heating oil: tariffs on kerosene heating oil are suspended until December 2028, which the Budget says will help households that rely on heating oil, including many in rural areas and Northern Ireland.
- Heat batteries: added to the energy saving materials that qualify for the 5% reduced VAT rate when installed in homes, from 1 April 2027.
Driving and travel
- Fuel duty: the government is cancelling plans to add 5p back onto fuel duty from January 2027. The cut is extended by a further six months to 1 July 2027, and the planned RPI inflation increase is deferred to the same date. The Budget says fuel duty is as low as it has been at any point for over 16 years, and that its fuel duty decisions across this Parliament are expected to have saved the average car driver £230 compared with the previous government’s plans.
- Mileage rates: for people who use their own car or van for work, the 55p per mile tax-free rate for the first 10,000 business miles becomes permanent, and the rate above 10,000 miles rises from 25p to 35p from 6 April 2027. The government says around 2 million employees and 1 million self-employed people, such as care workers, social workers, electricians and plumbers, will save £120 a year in tax if they drive 6,000 business miles, and up to £300 at 15,000 miles.
- Bus fares: single bus fares in England outside London will be capped at £2 for one year from 1 January 2027.
- Electric vehicle charging: £100 million over the next two years to cut the cost of local, lower-powered public chargers from spring 2027, expected to save the average EV driver without home charging who charges on-street around £150 a year. A taskforce will look at letting drivers use their home electricity tariff at these chargers.
- VAT on public charging: legislation will confirm that electricity from public and workplace charge points is subject to 20% VAT, from 1 November 2026.
Pay, benefits and families
Minimum wages
From 1 April 2027, the government is accepting the Low Pay Commission’s recommendations in full. It expects around 2.3 million workers to benefit.
| Rate | New hourly rate |
| National Living Wage | £13.21 (up 3.9%) |
| 18 to 20-year-olds | £11.27 (up 3.9%) |
| 16 to 17-year-olds and eligible apprentices | £8.31 (up 3.9%) |
The government says the National Living Wage rise is worth £910 a year in gross earnings to a full-time worker.
Families and carers
- Parental pay: from April 2029, eligible self-employed fathers, partners and adopters in Great Britain will be able to get parental pay for the first time, along with some people who do not qualify for statutory paternity or adoption pay. The government expects over 150,000 parents a year to benefit.
- Carer’s Allowance: carers will no longer lose their whole benefit for earning a penny over the Weekly Earnings Limit. A taper will reduce payments gradually instead, benefiting around 48,000 carers in England and Wales. It is planned for 2030-31, once a new IT system is in place.
- Universal Credit: the £2,500 surplus earnings threshold is kept for a further year, to the end of March 2028.
- Books for young children: up to £5 million a year for three years from 2027-28 for organisations such as Dolly Parton Imagination Library and BookTrust.
- Help to Save: the reformed scheme launches in spring 2028, with accounts offered by a wider range of providers, including some high street names.
- Child Benefit: HMRC will automatically offset Child Benefit overpayments against the High Income Child Benefit Charge, reducing unnecessary payments and repayments.
Students
Interest rates on Plan 2 and Plan 3 student loans are capped at 6% from 1 September 2026 to 31 August 2027.
Who gains most
The Treasury’s distributional analysis says that, on average, households in the lowest income deciles will benefit most from the Budget’s decisions in 2027-28, while tax increases are concentrated among the highest income households.
Tax, savings and pensions
The government says the Budget “rejects broad-based tax rises” and keeps the rates of tax paid on earnings unchanged. The main increases fall on income from savings and property.
Savings and property income
Budget 2025 had already raised tax rates on savings and property income by two percentage points from April 2027. This Budget adds a further two percentage points from the same date, 6 April 2027:
| Band | Savings income rate | Property income rate |
| Basic | 24% | 24% |
| Higher | 44% | 44% |
| Additional | 49% | 49% |
The savings rates apply across the UK; the property rates apply in England, Wales and Northern Ireland. The government says 84% of income tax payers will be unaffected and that around half the revenue will come from the top 10% of households.
The Budget points out that basic rate taxpayers would need over £25,000 in savings, on top of any ISA savings, before paying tax on savings interest.
ISAs
- The cash ISA limit stays at £20,000.
- The government will work with industry on a new incentive for people investing in a stocks and shares ISA for the first time.
- A new First Time Buyer ISA arrives in April 2029 (see Housing).
Pensioners
A new Pension Tax Allowance applies from 6 April 2027 to 5 April 2030. Pensioners whose total income is at or below the value of the full new State Pension will not have to pay small amounts of tax, and the allowance tapers away for those just above that level. The government says this means pensioners with income at or under the full new State Pension will not be brought into paying tax because of State Pension rises in this Parliament.
Other personal tax changes
- The Trading Allowance, which lets individuals receive small amounts of trading and miscellaneous income tax-free, triples from £1,000 to £3,000 from 6 April 2027.
- Foster carers and shared lives carers will see Qualifying Care Relief rise with CPI from 6 April 2027.
- From April 2028, the £2,500 limit that pushes people claiming employment expenses into Self Assessment will be removed, so more people can claim through PAYE.
- In England, the High Value Council Tax Surcharge will include a deferral scheme, discounts and exemptions, and a 100% premium on homes left empty for 12 months or more.
Housing
Your First Home
A new £4.7 billion equity loan scheme aims to help around 70,000 households in England onto the housing ladder, especially those without access to the “bank of mum and dad”.
| Feature | Detail |
| Equity loan | 20% of the property price |
| Deposit | A 2.5% deposit requirement, with a maximum deposit of 15% |
| Interest | Five years interest free, then a gradual increase |
| Household income cap | £110,000 outside London, £140,000 in London |
| Price caps | Based on local authority median prices; £650,000 in inner London and £500,000 in outer London |
| Timetable | Pre-registration by the end of December 2026, full applications from February 2027, first loans from April 2027 |
The government says users could save hundreds of pounds a month compared with a standard mortgage. Funding will be capped each year.
Saving for a first home
- First Time Buyer ISA: from April 2029, a new ISA replaces the Lifetime ISA for new savers. It keeps contributions of up to £4,000 a year with a 25% government bonus, paid on withdrawal for a first home worth up to £450,000. The bonus is capped at £20,000, there is no withdrawal charge for qualifying purchases, and there is no upper age limit.
- Lifetime ISA: from midnight on 29 October 2026, existing holders buying a first home above the £450,000 cap will pay a 20% withdrawal charge rather than 25%.
Social housing and homelessness
- An additional £1.5 billion for around 10,000 homes in England, prioritised for social rent and especially council homes, taking the Social and Affordable Homes Programme to more than £40 billion over 10 years.
- A new zero rate of VAT on land sold to registered social housing providers from 1 April 2027.
- A further £432 million across 2027-28 and 2028-29 to give people sleeping rough a route off the streets.
Renters
Stamp Duty Land Tax will no longer apply to rent paid under assured tenancies in England, effective from 1 May 2026.
Everyday costs and other changes
The food shop
Tariffs are suspended on all UK imports of over 100 food products, from plant-based drinks and baked beans to dried fruits and chocolate, until December 2028. The government expects this to cut consumer costs by £120 million to £185 million a year, and by £245 million to £595 million when combined with the food tariff suspensions announced in June. Tariffs on fertiliser are also suspended until December 2027 to lower costs for farmers.
What goes up with inflation
| Duty | Change | When |
| Alcohol duty | Rises with RPI, with more generous relief for small producers | 1 February 2027 |
| Soft Drinks Industry Levy | Rises with CPI plus a partial catch-up | 1 April 2027 |
| Vehicle Excise Duty for cars, vans and motorcycles | Rises with RPI | 1 April 2027 |
| Air Passenger Duty | Rises with RPI | 1 April 2028 |
Gambling
Machine Games Duty rises from 20% to 25% for machine games with stakes over £1 or prizes over £100 from 1 April 2027. The rate on lower stake machines is unchanged, which the government says protects pubs and seaside arcades.
Donated medicines
A new zero rate of VAT applies to medicines donated free of charge in qualifying circumstances, including early and expanded access schemes, for donations made on or after 23 June 2026. The government says this will help thousands of patients with serious illness.
Questions for households
Several things in the Budget are still to be settled:
- What happens to energy bills after July 2027? The VAT cut on electricity, the fuel duty cut and the red diesel cut all end on 1 July 2027, unless extended again.
- Who will lose out when gas standing charges go? The Budget accepts some households may be less able to benefit and promises targeted mitigation, without yet saying what it will be.
- What will electricity standing charge reform look like? Details are due next year.
- Who qualifies for the energy debt relief scheme? It launches next year for “eligible households”, with the criteria still to come.
- What will the new stocks and shares ISA incentive be? Its design will be developed with industry.
- What will the 2027 spending review mean for public services? The Budget says it is “not necessarily the case that all departments will see real terms increases”.
