Chancellor John Healey has delivered his Budget, announcing a £100 energy bill payment for millions of households, a minimum wage rise, and another freeze on fuel duty. A new calculator from tax advisory firm Blick Rothenberg shows exactly how these measures will affect your finances.
What the Budget means for your money
The Chancellor said the UK was being battered by a global economic storm, as he hiked taxes on banks and gambling firms to provide "breathing space" for households. He told MPs: "Those are the storms we face. We can't wish them away. We must choose the course we steer through them."
Millions of households will receive £100 to help with energy bills, while fuel duty has been frozen again for drivers stretched by high petrol and diesel prices.
Tax, wages and bills
The personal allowance remains frozen at £12,570. When tax thresholds are frozen, people get dragged into paying tax for the first time, or a higher rate of tax, as earnings increase - a process known as fiscal drag. It was previously reported that the government had been considering raising the personal allowance to £15,570. You pay 20% tax on earnings between £12,570 and £50,270, then 40% on earnings between £50,270 and £125,140 and 45% on earnings over £125,140.
The minimum wage is going up by 3.9% for 2.3 million workers. The minimum wage for workers aged 21 and over is currently £12.71 an hour and will rise to £13.21, while the rate for workers aged 18 to 20 will go up from £10.85 an hour to £11.27. However, as tax thresholds remain frozen, more of your income risks getting pushed into a higher tax bracket, depending on how much you earn.
Energy bills are expected to rise again this winter, so the government has announced a new £100 payment for 20 million households living in council tax band A to D properties, to help with rising costs. This money will be issued from January and paid into your bank account. New measures to help bring down energy bills were also announced. Standing charges on gas bills are being axed from 2027 "or as soon as possible after" in a move expected to save 60% of households an average of £45 off their annual bill. But the cost will be shifted to unit rates, meaning high-usage households could end up paying more. It comes after the Prime Minister removed VAT on electricity bills this month; the VAT cut had been due to end in March 2027, but has now been extended until July 2031. The government is also removing import tariffs on more than 100 products, which it says will save households up to £21 on their food shop each year.
Pensions, savings and housing
The state pension will rise to £13,036 a year from next April, in line with the triple lock. The increase pushes the state pension over the £12,570 tax-free personal allowance for the first time - but the government has confirmed that anyone claiming just the state pension will not have to pay tax, by increasing the personal allowance for low income pensioners to £13,036 and continuing to rise in line with the state pension. Those with a private pension or a higher state pension - for example, through additional payments or deferring the state pension claim - will still have to pay tax.
The Chancellor has scrapped a planned cut to the cash ISA allowance, which had been due to be reduced from £20,000 a year to £12,000 from next April for under-65s. But the tax on savings interest will rise to 24% for basic rate taxpayers from April 2027; it had been scheduled to rise to 22%. The savings higher rate will be 44%, and the savings additional rate will be 49%.
There is a new first-time buyer scheme called Your First Home, which requires buyers to have a deposit of 2.5% and then the government provides an equity loan worth 20% of the property value. Experts have warned that there is a risk of negative equity - when the amount you owe on your mortgage is greater than the current market value of your house - if the value of the property falls. The Lifetime ISA penalty is also being reduced from 25% to 20%, meaning you get back roughly what you have saved, plus interest, though not your bonus. The Lifetime ISA allows you to save £4,000 a year and you get a £1,000 bonus from the government. There is also a new First Time Buyer ISA planned from April 2029, replacing the Lifetime ISA; the bonus will only be paid out on completion of a property and this ISA cannot be used for retirement.
Drivers, smokers and drinkers
Fuel duty was frozen for a 16th year running after petrol and diesel prices surged because of the Iran war. It had been due to rise by 3p in January, then by another 2p in March - reversing a 5p cut that had been in place in 2022. The headline fuel duty rate is 52.95p per litre.
Vape shops will be excluded from business rates relief starting from April 2027, meaning shops may have to increase prices to absorb the extra costs. As of this month, all vaping products are now subject to a new Vaping Products Duty, with a flat rate tax of 22p per millilitre added onto vaping liquid, costing someone who buys a 10ml bottle of e-liquid an extra £2.20 in duty. Cigarettes also went up this month, in line with RPI inflation plus an additional two percentage points. The government will increase alcohol duty rates by 4.55% from next February, meaning tax on alcohol will go up by 14p on a bottle of prosecco, 18p on a bottle of 14.5% ABV red wine and 49p for a bottle of gin, according to the Wine and Spirit Trade Association.
