John Healey told MPs he was delivering a ‘budget for the working people of Britain’ – with a raft of measures including council tax relief, scrapping standing charges on gas bills and new charges for banks
John Healey has unveiled a raft of measures in his first Budget since becoming Chancellor.
Mr Healey confirmed standing charges on gas bills would be abolished, and announced banks would be hit with higher taxes to help with the cost-of-living crisis.
He also abolished Rachel Reeves’ proposed change to cash ISAs and announced fuel duty would not be going up.
The Chancellor told MPs: “This is a budget for the working people of Britain. For British businesses, big and small, delivered at a time when global uncertainties and pressures are swirling worldwide and hitting people here at home.”
Stay up to date with everything announced in our Budget 2026 live coverage.
Standing charges on gas bills
“Unfair” standing charges have been removed from gas bills in today’s Budget – in a move set to save millions of British families money.
Mr Healey unveiled the measure in his first economic statement to the country this afternoon, branding the charge outdated and unfair. Mr Healey will order Ofgem to ensure the charges are removed next year – or as soon as possible after. It is expected to save the average family around £45 a year.
Mr Burnham said: “Abolishing gas standing charges is about basic fairness and giving people more control over their bills. I am determined to reform our broken energy market, so it better serves the public interest.”
£100 Household Energy Payment relief
The Chancellor announced millions of households will get £100 to help with their energy bills – paid directly into their bank accounts.
Mr Healey said the payment would affect people in council tax bands A to D. The payments will be delivered through the council tax system, the Treasury said.
He told the Commons: “Let me say this to families at home: I know that with the conflict in the Middle East, rising energy bills are a real worry.
“I know that people look to government at times like this, not to solve all their problems, but to give them a bit of breathing space. So today, I’m taking one further step.
“This winter, for 20 million households in council tax bands A to D, I’m announcing a £100 energy payment for households, paid directly into people’s bank accounts to deal with rising energy bills.
“That’s a £2.6 billion scheme to take the pressure off in the coldest months and see people through to the spring.”
He confirmed that the Scottish, Welsh, and Northern Ireland governments would receive their share to give all nations “breathing space on their energy bills this winter”.
VAT cut on electricity bills extended
Mr Healey confirmed that the VAT cut on electricity bills, announced in the first weeks of Andy Burnham’s premiership, will be extended.
It will now be in place through the winter and until July next year. He told the Commons: “In the first week of this new government, we took VAT off electricity for 29 million households. Today, I am extending that VAT cut through the winter and spring to July, taking £50 off the annual price cap.”
Minimum wage
A key step announced in the Budget will be an increase in the national minimum wage and national living wage.
These are going up by 3.9%, the Chancellor said. He told the Commons: “For 2.3 million of our lowest-paid workers, I’m increasing both the National Minimum Wage and the National Living Wage by 3.9%.”
On April 1 next year, the National Living Wage will increase by 3.9% to £13.21 per hour – equivalent to an increase of £910 for a full-time worker. The National Minimum Wage for 18- to 20-year-olds will also increase by 3.9% to £11.27 per hour.
Gambling tax hike to pay for high street boost
Chancellor John Healey said he will hike gambling taxes to pay for a high street support package.
This will include increasing machine games duty from 20% to 25% for higher stakes machines. But he confirmed there will be carve-outs for pubs and seaside arcades.
He said it would support growth on high streets across the UK – more on that below. He said: “To pay for this support for our high streets, I’m raising taxes on gambling, by increasing Machine Games Duty from 20% to 25% for higher-stakes machines, whilst protecting pubs and seaside arcades.”
Cash free ISA change scrapped
Mr Healey announced he will reverse Rachel Reeves‘s planned cut to the cash ISA allowance.
The cash ISA allowance is currently set at £20,000 a year but had been due to be slashed to £12,000 from next April for under-65s.
The cutting of the cash ISA allowance was announced in the 2025 Budget – with the government hoping that it will encourage younger savers to invest in the stock market instead.
He continued: “88% of people will pay no more tax on their savings, and I am taking a new approach today to encourage people on ordinary incomes to save and to invest. I will not go ahead with the cut to the tax-free amount that people can put into a cash ISA. The limit will stay at £20,000 per year, tax-free, for people of all ages and to make investment accessible.
“I will work with the sector to create a new `Starter ISA’ to reward first-time investors.”
New bank tax to give families ‘breathing space’
The Chancellor announced the surcharge on bank profits will rise.
This will go up from 3% to 6% for 15 months. Mr Healey said the money would be used to boost Britain’s high street.
Mr Healey told the Commons: “I want to say directly to our banks: I celebrate and I am grateful for the role that you play. And amid the global economic storms, I am looking to our banks to help fund breathing space for British families. And so banks will pay an extra 3% on the bank surcharge. This will be time-limited to pay for immediate support on energy bills, starting in January, ending 15 months later.
“I’ve made my choice at this budget: asking a bit more of our banks to support ordinary people, raising taxes on gambling to support good growth on every high street.”
End of Lifetime ISA penalty for home buyers
Mr Healey has promised to end the Lifetime ISA penalty for those buying houses that cost more than £450,000.
He said: “I’m announcing that a new First Time Buyer ISA will replace the Lifetime ISA, and from today, I am dealing with the LIsa penalty. So if the home you want costs more than the limit, you will get back at least what you put in.
“And I’m going further: from next Spring, a new scheme for first time buyers who don’t have the bank of mum and dad behind them.
“Your First Home – an equity loan scheme, which I’m funding today with £4.7billion of government-backed lending.”
Fuel duty increase scrapped
The planned increase in fuel duty has been scrapped to help motorists with the cost of living.
Mr Healey said the 5p cut to fuel duty, which was due to end on December 31, would be extended until July 2027. The cut was introduced by the Tories in spring 2022 to freeze fuel duty at 52.95p per litre for both petrol and diesel.
The Chancellor told MPs: “With the war in the Middle East still driving high fuel prices, I am extending these tax cuts for motorists through the winter and spring to July, supporting households, hauliers, and farmers.
“And for anyone who relies on their car for their work, from care workers to engineers, I am increasing the higher mileage rate from 25p to 35p per mile, and making permanent the increase to the standard mileage rate introduced earlier this year.”
Hydrogen levy to be removed from household bills
The Government will directly fund hydrogen projects – with the controversial Gas Shipper Obligation scrapped.
Mr Healey told the Commons: “For many years, under Conservative governments, policy costs were loaded on to household bills through levies.
“Today, I am putting an end to that, we will introduce a new cost control framework to drive down all aspects of energy bills and I will scrap the upcoming Gas Shipper Obligation – a levy to fund hydrogen projects – and instead back those projects directly from government.”
Thousands of firms taken out of business rates
Some 70,000 more businesses will be taken out of business rates altogether – in a huge boost to small businesses.
Mr Healey said: “In the first week of this government, we cut 20% off business rates for pubs, clubs, and music venues from April next year.
“But I’ve heard calls from members across this House, and a call from one member in particular, the Right Honourable member for Macclesfield (Andy Burnham), and so I’m increasing the threshold for small business rate relief for retail, hospitality, and leisure businesses from £12,000 to £18,000. That means 70,000 more businesses, I’m not just cutting their rates, I’m taking them out of paying business rates altogether.
“That means half of our shops, restaurants, and gyms pay no business rates at all. And for all other businesses in these sectors, I will freeze their rates in real terms, so that none face an above-inflation rise for the next two years.”
Measures to tackle homelessness
At the weekend Mr Burnham announced funding behind his pledge to offer every rough sleeper a bed this Christmas will be doubled at the Budget.
No10 said cash to be unveiled at Wednesday’s Budget will commit a further £432million to tackle rough sleeping – boosting total funding to £874m. It said the funding would help deliver the ambition to offer people a route off the street before Christmas while sustaining support for years to come.
Mr Burnham, who outlined his mission to end rough sleeping during his first speech as PM outside No10, said: “Rough sleeping isn’t a fact of life. It’s a thing governments either choose to accept or don’t. Well I don’t accept it. That’s why we’re doubling funding so that people aren’t just offered a safe route off the streets this winter but have that same support right through the rest of this Parliament too.”
Cliff-edge rule for carers scrapped
Mr Healey has announced he is getting rid of a controversial rule that led to unpaid carers being punished with penalties.
The Chancellor said he is scrapping a cliff-edge rule meaning that if a carer earns more than £204 a week, they forfeit their entire week’s carer’s allowance payment. This currently stands at £86.45 a week.
Boost for council housing
The Chancellor confirmed an extra £1.5 billion for the government’s Social and Affordable Housing Programme to build more council housing.
The government also plans to help more councils borrow for housebuilding by extending preferential rates.
Mr Healey said: “The Conservatives sold off our council houses; Labour is now building them back.”
More support for Ukraine
Britain will commit £10billion of additional economic and military support to Ukraine, and half a billion in urgent military funding this winter, Mr Healey announced.
The Chancellor told the Commons: “The week in Kyiv started with Russia launching another brutal ballistic missile attack on the city. And this morning, the Prime Minister and I called President Zelensky to tell him about our commitments in the Budget today.
“He told us `you’ve made my day’, £10 billion of additional economic and military support – based on loans, export finance guarantees, and half a billion in urgent military funding for this winter.”
New rules for data centres
Mr Healey announced a new set of rules for data centres.
He said: “It is based on sovereignty – with our first-of-its-kind sovereign AI unit protecting UK interests by channelling Government investment into strategic British AI firms, backed with another £140 million today.
“To ensure our most sensitive data stays under British control, I am setting out a new deal for datacentres in the UK. When the NHS uses AI to treat patients, we want that data here. When our armed forces use AI to keep us safe, we want that data here. So here’s the deal.
“I am today launching a new British data centre covenant with strict tests that data centres must meet – to invest in local communities, create local jobs and protect local water supplies. In return, critical data centres will get the grid connections they need, and, where necessary, be allowed to build onsite generation while they wait.”
