Budget 2026: higher minimum wage, cheaper energy and ISA changes

Chancellor John Healey presented his first Budget to the House of Commons on 28 October 2026. According to the government's announcement, it aims to give households and businesses "breathing space" from rising costs. Here are the main changes affecting household finances.

Pay

From 1 April 2027, the National Living Wage will rise by 3.9% to £13.21 an hour. The government says this means about £910 more a year in gross earnings for a full-time worker on that rate.

Mileage rules will also change. The government is making the tax-free rate of 55p per mile permanent for the first 10,000 business miles. Above that threshold, the rate will rise from 25p to 35p per mile. The government says about 3 million employees and self-employed people who use their own vehicle for work will benefit.

Energy bills

In 2027, up to 20 million households in bands A to D in England are due to receive a one-off £100 Household Energy Payment. The rest of the UK is to receive funding for similar support. The temporary VAT cut on electricity bills will be extended until 1 July 2027. The government estimates this will take about £50 off the Ofgem annual price cap in April 2027. It will be paid for partly by raising the Bank Corporation Tax Surcharge from 3% to 6% for 15 months.

The government will also ask Ofgem to abolish gas standing charges and move them into unit rates. According to a separate government statement, this affects around 23 million homes. Households that do not see an automatic saving are promised "targeted" support, with details to follow. A new Warm Homes loans scheme will help people spread the cost of solar panels, batteries and heat pumps, which the government says could cut bills by up to £550 a year.

Fuel and shop prices

The 5p cut in fuel duty will be extended for a further six months, and the planned RPI-linked increase has been deferred to 1 July 2027. The government says petrol and diesel will be 15p per litre cheaper from April 2027. Tariffs have been removed on more than 100 products, including chocolate and baked beans.

Savings and housing

A new First Time Buyer ISA will make it easier to save for a deposit. From 28 October 2026, the Lifetime ISA withdrawal charge falls to 20%, so first-time buyers purchasing a home above the current £450,000 cap are not penalised. The Your First Home Scheme is meant to help 70,000 people buy their first home. A further £1.5 billion has been allocated to social and affordable housing.

Parents and business

Paid leave for fathers and partners will be extended to more than 160,000 additional parents, including self-employed people.

For retail, hospitality and leisure properties in England, the government is announcing a two-year real-terms freeze in business rates bills. Around 70,000 more businesses in these sectors are expected to be taken out of business rates after the Small Business Rates Relief threshold is raised. Business rates are devolved, so Scotland, Wales and Northern Ireland will receive funding they can use for similar measures.

What this means for you

The changes to pay, energy and fuel affect all residents, including people living in the UK who work and pay bills here. Those paid the National Living Wage will see a higher wage from April 2027. Employees who drive their own car for work may benefit from the higher mileage rate. People planning to buy their first home should check the rules for the new ISA and the Lifetime ISA. Many details, such as those on gas standing charges, are still to be clarified.