Budget 2026: What changed for your money
Chancellor John Healey delivered his first Budget on 28 October 2026 — the first under Prime Minister Andy Burnham's government. There were no changes to the headline rates of income tax, employee National Insurance or VAT. Below, changes are grouped by area, with a note on whether each one is already in force, confirmed for a future date, or still to be legislated.
Household bills
VAT on domestic electricity stays at 0% until July 2027 — confirmed at this Budget. The rate was already cut from 5% to 0% from 1 October 2026; this extends the zero rate for a further three months, taking around £50 off the annual Ofgem price cap when it's reflected in April 2027. For electricity specifically, not domestic gas or other fuels.
A £2.6 billion Household Energy Payment will put £100 directly into eligible households' hands from January 2027. It's delivered via the Council Tax system, for up to 20 million households in England in council tax bands A to D. Devolved governments receive their share of the funding through the Barnett formula, to provide comparable support.
Savings and ISAs
The £20,000 ISA allowance stays as it is for all savers over 18, including for cash — the previous plan to cap the cash ISA portion at £12,000 a year for under-65s from April 2027 has been scrapped, confirmed by secondary legislation due to be laid before Parliament in November 2026. The ISA Allowance Tracker shows how much of this year's £20,000 you've used. See what the Cash ISA reversal means for your savings for the full detail.
The Lifetime ISA is being replaced by a new First Time Buyer ISA from April 2029. Confirmed at this Budget, with primary and secondary legislation still to be introduced before launch. The new account offers a 25% government bonus on the final account balance, paid on withdrawal, up to a maximum bonus of £20,000, towards a first home worth up to £450,000. Existing Lifetime ISA holders can continue contributing to and using their existing accounts under current rules.
The Lifetime ISA withdrawal charge is reduced to 20% for purchases above £450,000 — in force from 29 October 2026, by secondary legislation. A reduced 20% charge now applies to otherwise-qualifying first-home purchases above the £450,000 cap, recovering only the government bonus rather than the full 25%. Other unauthorised withdrawals still carry the full 25% charge.
Tax on savings and property income is rising to 24%, 44% and 49% (basic, higher and additional rate) from 6 April 2027 — newly announced at Budget 2026, to be legislated via Finance Bill 2026-27, and replacing the 22%/42%/47% rates previously legislated at the 2025 Budget before those ever take effect. The government says 84% of income tax payers are unaffected, with around half the revenue raised expected to come from the top 10% of households.
Housing
Your First Home, a £4.7 billion equity-loan scheme, aims to help around 70,000 first-time buyers onto the property ladder over five years. Buyers will need a deposit of at least 2.5%, topped up with a government equity loan worth 20% of the purchase price of a new-build home in England, interest-free for the first five years. Interest then applies: 1.5% in year six, rising to 3% from year seven onwards. A household's total annual income must be £110,000 or less outside London, or £140,000 or less in London, and local property price caps apply — set at £650,000 in inner London and £500,000 in outer London, with caps elsewhere based on local new-build prices.
The equity loan is linked to the value of your home, not a fixed cash amount: when you repay it — normally on sale — you repay the same percentage of the home's value at that point, so the amount owed rises if the property has gone up in value, and falls if the property has fallen in value.
The scheme isn't open yet. Pre-registration is expected by the end of December 2026, with the first customer applications from February 2027 and the first property sales under the scheme from April 2027. Full eligibility rules, repayment guidance and the list of participating developers are still to be published. The Mortgage Affordability Calculator can help you model what you could borrow in the meantime, on the rules as they stand today.
Pensions and the State Pension
A new Pension Tax Allowance protects pensioners near the personal allowance from a small tax liability — originally announced at the 2025 Budget, with legislation now being introduced via Finance Bill 2026-27, taking effect from 6 April 2027 and running for tax years 2027/28 to 2029/30. In plain terms, this is a targeted piece of tax relief, not a general exemption from income tax for pensioners: it specifically covers the small amount of tax that would otherwise be owed because the State Pension itself has risen above the frozen personal allowance, for pensioners whose total income sits at or below the value of the full new State Pension. Above that income level, the allowance is gradually withdrawn at £1 for every £3 of additional income. Pensioners with meaningfully higher income from other sources are taxed on that income as normal.
The State Pension is rising by 3.9% under the triple lock, taking the full new State Pension to £250.70 a week, or £13,036.40 a year, from April 2027 — confirmed at this Budget.
The triple lock itself is being adjusted, but not until April 2030 — announced, future change. It continues unchanged up to and including the April 2029 uprating. From April 2030, the State Pension will instead rise each year by the highest of 2.5%, inflation, or the amount needed to maintain its value relative to average earnings at the April 2029 level.
No cut to the pension tax-free lump sum. The Chancellor decided against reducing the maximum tax-free lump sum people can draw from a private pension, so the existing rules are unchanged.
Pay
From 1 April 2027 — announced, future change — the National Living Wage (21 and over) rises by 3.9% to £13.21 an hour, worth around £910 a year more in gross pay for a full-time worker. The National Minimum Wage for 18 to 20-year-olds rises to £11.27 an hour, and the rate for 16 to 17-year-olds and apprentices rises to £8.31 an hour.
Driving and travel
The 55p-a-mile approved mileage rate has been made permanent — already in force. The rate above 10,000 business miles a year separately rises from 25p to 35p per mile from 6 April 2027. These rates apply to business mileage, not ordinary commuting.
Fuel duty's temporary 5p cut is extended until 30 June 2027, cancelling a planned staged rise that had been due from January 2027. Rates return to pre-2022 levels, uprated for inflation, from 1 July 2027.
Single bus fares in England outside London will be capped at £2 for one year in 2027 — announced, future change.
What didn't change
There were no rises to the headline rates of income tax, employee National Insurance or VAT. No further change to dividend tax rates was announced at this Budget, beyond the increase already in force from April 2026.
Frequently asked questions
Sources: HM Treasury, Budget 2026 (28 October 2026); HM Revenue & Customs, Budget 2026: Overview of Tax Legislation and Rates (OOTLAR); Ministry of Housing, Communities and Local Government, Your First Home; GOV.UK, Lifetime ISA guidance.