UK Budget 2026: £100 Energy Bill Support and Bank Profit Tax Increase

Introduction

Chancellor John Healey delivered his first Budget speech, introducing a package of immediate cost-of-living support and longer-term fiscal measures aimed at stabilising the UK economy amid ongoing global uncertainty.

What Happened

The Budget included a £100 one-off payment for millions of households in council tax bands A to D to help with rising energy costs, funded by an increase in the bank profit tax from 3% to 6%. Chancellor Healey also confirmed a 5p fuel duty cut will remain in place until July, while minimum wage rates will rise by 3.9% from April. Plans to raise the business rates relief threshold from £12,000 to £18,000 were announced to support high street retailers, though vape shops and adult gaming centres were excluded.

Additional measures included the pledge to scrap gas standing charges in England, Scotland and Wales during 2027, with costs shifted to per-unit energy prices. Income tax thresholds will remain frozen, and the tax on savings and property rental income will increase to 24% for basic rate taxpayers from April 2027. The planned reduction of the cash ISA allowance from £20,000 to £12,000 has been scrapped.

Why This Matters

The package reflects the government's effort to provide immediate relief to households and businesses while addressing a stretched public finances situation, with the Office for Budget Responsibility warning that the UK economy will grow just 1% next year and that households will remain barely better off than before the pandemic even after a decade. The bank tax increase and energy support are intended to balance short-term aid with longer-term revenue goals, though opposition parties and industry groups argue the measures do not go far enough.

Devolution plans giving regional mayors more control over business rates and income tax aim to empower local spending, while the defence spending commitment outlines a path to meet target spending levels by 2030. However, key decisions on welfare and defence funding have been postponed pending independent reviews.

Key Takeaways

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• £100 energy bill support for households in bands A-D, funded by a higher bank profit tax
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• Fuel duty cut extended through July; minimum wage rising 3.9% in April
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• Business rates relief threshold increased; vape shops and gaming centres excluded
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• Gas standing charges to be removed in 2027, costs moved to per-unit rates
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• Savings and property rental tax to rise to 24% for basic rate taxpayers from 2027
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• Cash ISA allowance cut axed; OBR forecasts 1% growth next year
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• Mayors to receive 20% of business rates and income tax share for local priorities
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• Defence spending commitment to reach 3% of national income by 2030, 3.5% by 2035
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Conclusion

Healey's first Budget delivers a blend of targeted cost-of-living support and fiscal adjustments designed to navigate a challenging economic backdrop. While the measures provide immediate relief for many households and businesses, the delayed decisions on welfare and defence spending, along with mixed reactions from opposition parties, highlight the ongoing challenges of managing public finances under global pressure. The coming months will reveal whether these steps are sufficient to steer the economy through the global storms the chancellor described.