Budget 2026: What London can expect from the Chancellor's tax and spending announcements

John Healey is unveiling his first Budget on Wednesday with London braced for blows and benefits from his tax, spending and devolution plans.

Tax rises will almost certainly hit the capital hardest given that it is the wealthiest region of Britain.

Devolution of power

However, with his hands partly tied due to Britain’s debt mountain having risen to an eyewatering £3 trillion, Mr Healey was seeking economic growth through a major shift of powers to stop the UK being such a centralised nation.

Lord Sadiq Khan is expected to be given new fiscal powers by the Chancellor

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The City

Unions have been calling for the move to raise money to ease the cost of living for millions of struggling households.

Ahead of going to the Commons to deliver his speech, 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.”

The City is braced for a new tax blow in the Budget

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Capital gains tax

Economists have warned Mr Healey of the risk of undermining growth with new tax rises and he has decided not to increase capital gains tax, defying calls from some of Mr Burnham’s close allies to do so.

Cost of living

But they will have a limited impact compared to inflation, at 3.5% and fuelled by Donald Trump’s Iran war, which is eating into the living standards of many people across Britain.

But these measures will by no means fully offset rising energy bills, which are predicted to hit nearly £2,200-a-year for many households later this winter.

Andy Burnham and Chancellor John Healey drinking a pint at a pub in Essex

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Young workers

The Chancellor was set to announce a rise of around 4% in the National Living Wage for workers aged 21 and over, and in the National Minimum Wage for those aged 18 to 20.

The Minimum Wage was ramped up by 26% between 2025 and 2026 but the jump was blamed for bosses in pubs, hotels, the wider hospitality and other sectors hiring fewer staff as workforce bills rose.

Many young Londoners are not able to buy a home in the capital

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Homes and tax

The Chancellor was reportedly due to make the Government's revived Help to Buy scheme more generous than initially planned, including in London.

He was expected to set a cap for household eligible for the Your First Home scheme, which offers first-time buyers a 20% equity loan, at £110,000 outside the capital and £140,000 in the city.

More than £1 billion may be allocated for social and affordable homes.

Pensioners and triple lock

The tax-free allowance for low-income pensioners may rise next year to just over £13,000 to meet the pledge that the elderly who rely only on the State pension do not pay income tax.

Some businesses may benefit from business rate cuts including in Guildford high street

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Business rates cut

Mr Healey was expected to announce an increase in the threshold at which small companies start paying business rates from £12,000 to £18,000.

The move would mean thousands of high-street shops, cafes, pubs and other small businesses would no longer have to pay business rates, or have lower bills.

Nation’s finances

The Chancellor had an economic cushion, or “fiscal headroom”, of around £24 billion in March, according to the Office for Budget Responsibility and this was expected to fall as he tries to balance the books.