Chancellor John Healey presented his inaugural Budget on Wednesday, outlining a package aimed at easing cost-of-living pressures while providing targeted support to businesses and workers. The measures come amid ongoing global economic uncertainty fueled by geopolitical tensions.
Healey described the Budget as one "for the working people," combining immediate relief with longer-term structural reforms. He emphasized fiscal discipline while addressing the challenges posed by global economic storms.
Among the headline announcements, the government will provide a £100 energy payment to approximately 20 million households in England in council tax bands A to D, with payments starting in January 2027. The £2.6 billion Household Energy Payment scheme is designed to offer breathing space to families concerned about rising energy bills.
Additionally, the VAT cut on electricity will be extended until July 2027, expected to reduce the annual energy price cap by around £50 in April 2027. The government also introduced an Energy Debt Circuit Breaker to tackle accumulated energy debt, potentially saving billpayers about £30 annually by 2030.
The Budget raises the National Living Wage by 3.9% to £13.21 per hour, with the minimum wage for 18-20 year olds increasing to £11.27. Fuel duty remains frozen for a 16th consecutive year, and the tax-free mileage rate for work-related vehicle use rises from 25p to 30p per mile.
To ease grocery costs, import tariffs on over 100 products, including baked beans, chocolate, and gherkins, will be removed, potentially saving households up to £21 a year. The government also expanded parental pay to include self-employed fathers and partners for the first time.
For businesses, the British Industrial Competitiveness Scheme, launching in April 2027, will offer electricity discounts of 20% to 25% to around 10,000 energy-intensive manufacturers. Small business rate relief thresholds will increase from £12,000 to £18,000, benefiting an additional 70,000 businesses. However, adult gaming centres and vape shops are excluded from these reliefs.
The Budget also introduces higher taxes on gambling companies and strengthens HMRC's powers to collect overdue taxes from those who can afford to pay but ignore contact. Online marketplace sellers will face increased scrutiny to prevent VAT avoidance.
Market reaction was muted, with the pound slightly lower and gilt yields easing. Analysts noted that most measures were well-flagged, with the banking sector showing a mild rebound as tax increases came in at the lower end of expectations.
This article is for informational purposes only and does not constitute financial advice.
