Budget 2026: Key points announced by Chancellor John Healey from energy bills to devolution

Chancellor John Healey has delivered his first Budget speech.

Here are the key points as announced in the Commons on Wednesday:

GDP

The Office for Budget Responsibility has upgraded its economic growth forecast to 1.2% this year, Mr Healey said, followed by 1% next year, 1.6% in 2028, 1.8% in 2029, 1.7% in 2030 and 1.6% in 2031.

Given the slow GDP growth, the Chancellor added: “Yes, there are real challenges ahead, but Britain has beaten the forecasts this year, And with the action I’m taking today, I believe Britain can beat them again.”

Debt

Britain will spend £14bn more on debt interest this year, says the Office for Budget Responsibility

Borrowing

Borrowing falls to 4.2% this year, 3.4% next year, 2.9% in 28/29, 2.1% in 29/30, and 1.8% in 30/31 and 31/32, the Chancellor said.

Economic cushion

The “fiscal headroom” will be £15bn in 2029/30, before rising to £22bn in 2030/31.

Chancellor John Healey delivering his Budget on Wednesday

PA

Energy bills

Standing charges on gas bills, which cover the cost of delivery to homes and businesses, will be scrapped from 2027 “or as soon as possible after,” says the Treasury. VAT has been axed from electricity bills.

The Chancellor stressed that for business, the new British Industrial Competitiveness Scheme will take 25% off electricity bills for 10,000 firms.

Help for struggling households

Twenty million households in council tax bands A-D will get a £100 ‘Household Energy Payment’ paid directly into their bank accounts to help deal with rising energy bills. The scheme will cost £2.6 billion.

Fuel duty

The 5p cut to Fuel Duty and reduction in red diesel to its lowest rate in over 20 years are extended until July.

Supermarket prices

Tariffs on more than 100 supermarket products, including chocolate and gherkins, are suspended to keep prices down.

Low paid

Around 2.3 million people on low pay will see a 3.9% rise in the National Minimum Wage and the National Living Wage.

Devolution of powers

“More power in the hands of the local leaders who know their areas best,” he said.

All business rates will be retained locally by 2030, with 20% of revenue going to mayors from next year. New growth fund and £1.5 billion of loans will also be accessible for mayors.

The Chancellor singled-out the extension of the Bakerloo line in London as the type of project that could be funded by the new fiscal powers for mayors.

Bank tax

Mr Healey hit the City with an extra 3% on the Bank Surcharge to fund help on energy bills for less well off households.

Corporation tax

The Chancellor said he was maintaining full expensing in Corporation Tax for eligible assets. He added: “For other assets, I will provide greater upfront relief for new investment, increasing the main rate first-year allowance from 40% to 50%, while reducing the main writing down allowance from 14% to 12%.

He also cut the threshold for Business Asset Disposal Relief in Capital Gains Tax from £1m to £500,000, which he stressed meant no change for 3 in 4 claimants.

He added: “I am increasing the rates of tax on income from property and savings by a further two percentage points from April 2027.”

Business rates

The threshold for Small Business Rate Relief for retail hospitality and leisure businesses was increased from £12,000 to £18,000.

Tax reforms

Mr Healey gave HMRC funding to improve compliance, and stronger powers to collect overdue tax from those he said can clearly afford to pay, but ignore repeated contact.

He added: “I am reforming the administration of self-assessed income tax from 2029… …bringing more of these taxpayers in line with the majority, So that they make smaller, more regular payments instead of facing larger bills that are harder to pay.”

John Healey leaves 11 Downing Street before delivering his first Budget

PA

Gaming tax

Gambling taxes will rise to pay for a high street support package, including by increasing machine games duty from 20% to 25% for higher stakes machines.

ISA

The Chancellor ditched his predecessor Rachel Reeves’ plan to cut the cash allowance for tax-free ISAs from £20,000 to £12,000.

Budget aims

Summing up his plans, Mr Healey said: “This Budget is designed to give households breathing space from some of the everyday costs, provide targeted support for businesses and self-employed people, and to start the long-term action needed to get energy costs down for good.”

Pensioners

The “triple lock” will be changed from 2030 so the State pension rises by inflation, 2.5% but not the increase in average earnings, which ever is higher.

Tourist tax

Mayors, such as London’s Sadiq Khan, will be able to apply an “overnight visitor levy” from 2028 to raise money.

First-time buyers

A revised Help To Buy scheme, called “Your First Home”, was confirmed. It will be an equity loan scheme for first-time buyers with £4.7 billion of Government-backed lending.

The £4.7 billion scheme will offer first-time buyers a 20% equity loan to help them buy a new-build home, with a minimum deposit of just 2.5% and maximum of 15%.

The earnings cap has been set at £140,000 in London and £110,000 outside London.

House building

No major changes to building regulations will be made in this Parliament, except where critical for safety, to boost house building.

Cheaper borrowing will be made available to councils to increase the number of new council homes. An additional £1.5 billion for the social and affordable housing programme also was announced.

Defence

The Chancellor said he is “getting work under way” to reach spending of 3% of GDP on defence by 2030. He intends to set out how he will hit that target at next year’s spending review.