Martin Lewis has reacted to the 2026 Budget, saying he is 'delighted' by some of the announcements but warning that the 'biggest single tax rise' facing Britons was not mentioned at all. The comments follow John Healey's unveiling of his first Budget as Chancellor on October 28.
Mr Healey outlined a series of measures and fresh proposals in his inaugural Autumn Budget as Chancellor of the Exchequer, in an effort to 'ease the cost of living' for individuals and businesses throughout the UK.
What was announced in the Budget
Among the headline announcements was the news that 20 million UK households are set to receive a one-off £100 payment this winter to help ease financial pressures during the colder months. Mr Healey also revealed a new tax rule designed to prevent low-income state pensioners from paying income tax when the full state pension amount exceeds the personal allowance next year.
In a reaction video shared across Martin Lewis's social media channels, the financial expert broke down what the Budget means in practical terms for households. He addressed topics ranging from energy bills and property purchases to driving, benefits claims, savings and investments.
'The biggest single tax rise we've had in years'
Mr Lewis began his assessment by highlighting "what wasn't in the Budget". He said: "It's the biggest single tax rise we've had for years and it's carrying on."
The financial expert was referring to fiscal drag, explaining that it is the effect of income tax thresholds remaining frozen. "That's what fiscal drag is, that's the biggest revenue raiser, that isn't changing," he said.
Mr Lewis noted that because the income tax threshold is frozen at £12,570, individuals end up paying more tax as their wages increase. He suggested the threshold appeared likely to remain frozen "for a few more years".
He further noted that the situation was even more problematic for those repaying a Plan 2 student loan. He said: "Rachel Reeves announced last year that the student loan repayment threshold on Plan 2 would be frozen from April 2027 until 2030 and there's no change on that either. So you have double fiscal drag."
He added that those impacted are essentially paying more towards their student loans, something he is actively campaigning against as a 'breach of natural justice'.
Energy bills and the £100 payment
Another development he highlighted was the scrapping of standing charges on gas bills - fixed daily fees added to bills - from next year for approximately 23 million homes. Instead, fixed costs will be incorporated into the unit rate, which the Treasury said could save 60% of households an average of £45 on their annual bills.
Mr Lewis said: "I think it will be less than 1p/KwH put onto the unit rate of gas which means lower users will pay less, higher users will pay more but ultimately, that is a big win because it means the more you use the more you pay, and the less you use the less you pay. It's a much simpler system and they're looking to do it on electricity too."
However, he described the "big news on energy" as the £100 payment to certain council tax bands. He explained: "In January, if you live in a household that pays council tax Band A to D, your house will get £100 of energy support paid to you by direct debit."
He added that the payment was not means-tested and those eligible "will simply get the £100".
He went on to say: "Of course it means some people who don't need it will get it and it means some people who do need it won't get it. For the latter group, there's £100 million being made available for councils for extra support."
Nevertheless, he warned that the payment coincides with a significant surge in energy prices. "If you look at why this is being done, we're expecting the energy price cap to go up 27% in January," he stated.
He noted that over that three-month period, households with typical bills would face approximately £100 in additional charges, meaning the £100 payment "pretty much going to cover" that increase.
Savings and ISA changes
Turning to positive developments for savers, he commented: "Next - a good one - the cash ISA limit, which was due to be slashed for under 65s to £12,000 a year to £20,000 a year is gone, that's no longer happening. And all the anti-avoidance measures that have been put in place, like you couldn't transfer from a shares Isa to a cash Isa, that's all gone too, it's not happening anymore."
Mr Lewis expressed his satisfaction that the chancellor had taken his advice on board after he proposed encouraging young people into investing 'with a carrot rather than a stick'. He said: "I'm delighted to say that the Chancellor has listened to the idea I suggested to him, which is 'don't do it with a stick, you want to get young people to invest, do it with a carrot', and he is consulting on the new starter investment ISA."
Nevertheless, he warned of a fresh 'problem' regarding savings. He explained that for those liable to pay tax on interest earned - specifically those who have exhausted their ISA allowances and the £1,000 in annual tax-free savings interest - the tax rate applied to savings would rise from next April.
He noted that basic rate taxpayers will pay 24%, higher rate taxpayers 44%, and top rate taxpayers 49% - essentially the standard rate plus 4% - making it all the more important to maximise tax-free allowances.
Mr Lewis stated that the First Time Buyer ISA launching in April 2029 will be a "much simpler product than the Lifetime ISA". He said overall he was "probably most happy" about a change to the Lifetime ISA penalty as he had been campaigning on it for years.
Explaining the change, he said: "So right now, if you buy a house and it costs over the £450,000 threshold, you have to pay a penalty, effectively a fine of over 6% to the state to get your money out to use it on a house. That's gone."
The technical way this works is that currently the penalty is 25% of what you've got, it's going to be 20%. This all sounds like gobbledygook, but just think for a second. You put money in, up to £4,000 a year, you get 25% added on top.
"If they take 25% off, that leaves you with less than you started with. If they take 20% off, the way the maths works is, you get back what you started with plus interest."
Under the revised system, if you purchase a property using a Lifetime ISA valued below £450,000 you receive the 25% bonus, whereas if the property exceeds £450,000 you forgo the bonus but recoup your original contributions plus interest, he clarified.
"You will be no worse off putting your money in a Lifetime ISA than in a normal cash ISA as long as you're definitely buying a house," he said. "It de-risks it and it gets rid of some of the penalties for people buying bigger houses who've been priced out, say, because they live in the south-east of England."
The good news is that the penalty will be removed from tomorrow, Thursday, October 29, he added.
Pensioners and the new tax allowance
Mr Lewis also outlined how the new pension tax allowance would operate. He said: "This all stems from the fact that for the first time in April 2027, the full new state pension - £13,040 - is higher than the tax free personal allowance which is frozen at £12,570. Effectively, if you had to pay tax on it, it would be £94 of tax that you would pay."
He clarified that while Ms Reeves had previously confirmed that nobody receiving the full new state pension would be liable for tax, she had not elaborated on the mechanics of how this would function. This announcement now provides that clarity, he said.
Mr Lewis said: "If you earn under £13,040 and you're a state pensioner, you just won't pay tax. If you earn slightly above that, for every £3 you earn above it, you lose £1 of tax gain - £1 of that £94."
"So that means if you earn say £13,186 - £150 above it - you would still get a tax gain of £44 compared to someone who wasn't a state pensioner. By the time you earn £13,319 then this has disappeared. So it is just a way of giving you a slight taper above that."
