Chancellor John Healey has delivered his first Budget, announcing a 3.9% increase to the National Minimum Wage and National Living Wage, a £100 winter energy payment for 20 million households, and an extension of the VAT cut on electricity bills.
Wage rise for low-paid workers
Speaking in Parliament, Mr Healey confirmed that low-paid workers will see their hourly rate rise from £12.71 to £13.20 from next April, a 49p increase for adults aged 21 and over.
"For 2.3 million of our lowest paid workers, I am increasing both the National Minimum Wage and the National Living Wage by 3.9%," he said.
£100 energy payment and standing charge removal
In a surprise announcement, the Chancellor said 20 million households in council tax bands A to D will receive a £100 payment to help with energy bills this winter.
"I know rising energy bills are a real worry and people look to government to give them a bit of breathing space. So this winter for 20 million households in council tax bands A to D, I am announcing a £100 energy payment for households," Mr Healey said.
"That's a £2.6 billion scheme to take the pressure off in the coldest months and see people through to the spring."
He added: "The Scottish, Welsh and Northern Ireland governments will receive their share of the funding, but I call on them to do the same and give people in all nations in the UK breathing space on their energy bills this winter."
The announcement followed news that the government would be removing standing charges on gas bills. These are added to bills regardless of how much gas a customer uses. The Chancellor will ask Ofgem to deliver removal of these charges, which are £108 a year for the typical household on average, in 2027 or as soon as possible after. Instead, these fixed costs will be paid on the unit rate, which could save 60% of account-holding households around an average of £45 off their annual bill.
Tax changes and supermarket tariff cuts
Before outlining tax changes, Mr Healey reassured the House of Commons that he has "kept the Labour manifesto promise not to raise tax on working people". He said he has rejected "broad-based" tax rises, recognising that families and businesses "need this breathing room".
The cut to VAT on electricity will be extended to July, taking £50 off the annual price cap. He also promised to cut electricity bills by up to 25% for over 10,000 eligible UK manufacturing and industrial firms starting in April 2027.
The government is officially scrapping the Gas Shipper Obligation (GSO) and levy, instead shifting environmental project funding directly into the wider tax base.
The Budget confirmed suspension of tariffs on over 100 supermarket products including chocolate, baked beans and gherkins.
High street support and business rates
The Chancellor said he will hike gambling taxes to pay for a high street support package, including by increasing machine games duty from 20% to 25% for higher stakes machines.
Meanwhile, sellers on online marketplaces will be charged VAT, and he announced a £10 million alcohol duty relief for about 2,000 smaller British brewers and cider makers.
An expansion of the Small Business Rates Relief (SBRR) will run alongside the previously confirmed 20% cut to business rates targeted directly at pubs, social clubs, and eligible live music venues. The threshold will increase from £12,000 to £18,000 from April 2027 and is predicted to take 70,000 small businesses out of paying any business rates entirely.
Healey added that a mechanism will be built in to carve out vapes shops from business rate relief. He also announced a Capital Gains Tax (CGT) relief for the founders of successful firms in the UK.
Chancellor John Healey told the Commons the tax-free cash ISA limit would remain at £20,000. He also announced that the UK bank corporation tax surcharge will increase from 3% to 6%.
