Chancellor John Healey has delivered the 2026 Budget, the first under Prime Minister Andy Burnham, promising households and businesses "breathing space today" from everyday costs. Speaking in the House of Commons, he described it as "a Budget for the working people of Britain".
Key Announcements on Energy and Business Rates
The Chancellor announced an extension of the VAT cut on electricity to July, reducing the annual price cap by £50, alongside a £100 household energy payment for people in council tax bands A to D to help with bills "through to the spring".
He also told MPs he will raise the threshold for small business rate relief for retail, hospitality and leisure businesses to £18,000, and freeze rates for all other firms in these sectors in real terms.
Wages, Pensions and Benefits
The national minimum wage and national living wage will increase by 3.9% for 2.3 million workers, he confirmed. New rates for the state pension and other benefits will take effect from April next year, along with new tax rules preventing low-income state pensioners from paying income tax when the full state pension exceeds the personal allowance.
A major change to Carer's Allowance will end the earnings threshold 'cliff edge', also included in the Budget.
Fiscal Constraints and Economic Context
Mr Healey has limited scope for significant giveaways due to the stretched state of public finances, worsened by international market turmoil caused by the Iran war. He will stick with rules set by his predecessor Rachel Reeves, requiring day-to-day spending to be financed by taxes rather than borrowing.
In a video teaser released before the Budget, he said: "Breathing space for today and fresh hope for the future. That's what today's Budget will deliver." He noted that conflicts abroad are pushing up energy prices and the cost of living, but said Britain's economy is showing resilience, with investments up, productivity growing, and joint fastest growth in the G7 in the first half of this year.
The Budget is designed to give households breathing space from everyday costs, provide targeted support for businesses and self-employed people, and start long-term action to reduce energy costs for good.
