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Budget 2026: what Healey announced
— 3 mins read
The Chancellor set out a time-limited levy on banks, help with winter bills, a shift of tax revenue to mayors and £10bn more for Ukraine, against a weaker outlook for growth.
John Healey delivered his first Budget as Chancellor today against a weaker economic outlook. He raised taxes on banks and gambling to pay for help with energy bills, handed mayors a share of tax revenue and committed a further £10bn to Ukraine.
The outlook
The Office for Budget Responsibility expects the economy to grow by 1.2% this year before slowing to 1% next year, a sharp drop from its earlier expectations. That forecast frames everything else in the statement. Healey said support had to be paid for and that he had raised taxes in “a balanced way”.
Tax rises
Banks carry the largest share. The bank surcharge rises by 3%, taking it to 6% on top of the 25% rate of corporation tax. The increase starts in January 2027, runs for 15 months and is described as “time-limited”. It was smaller than expected; speculation had put it at 5% or even 8%, and Barclays, NatWest and Lloyds shares all rose after the announcement.
Taxes on gambling also go up, and the Chancellor said that money would support the high street. The threshold for business asset disposal relief in capital gains tax is halved from £1m to £500,000, though Healey said three in four claimants would see no change. He also promised to close loopholes and make sure people “pay the tax they owe, when they owe it”. How much that will raise is uncertain until the detailed documents are published.
Help with bills
Twenty million households in council tax bands A to D in England will receive a £100 “household energy payment” this winter, with equivalent funding for Scotland, Wales and Northern Ireland. The VAT cut on electricity is extended through the winter and spring.
Business and savers
Around 70,000 small businesses will pay no business rates after the threshold rises from a rateable value of £12,000 to £18,000. The trading allowance for new ventures rises from £1,000 to £3,000, and a new “founders’ relief” sets a 10% rate on lifetime gains of up to £10m. The British Business Bank will double its commitment to women-led businesses to £200m.
The planned cut to the cash ISA allowance has been dropped, so it stays at £20,000 a year. A new “Starter ISA” is being developed with the industry.
Wages and welfare
The minimum wage for 18 to 20-year-olds rises by 3.9%. That matches the rise for those aged 21 and over but is smaller than the increases of the past two years. Healey confirmed changes to the state pension triple lock alongside a new National Care Service, saying the combined reforms would save £15bn a year by the end of the 2030s.
Devolution
Healey set out a “roadmap to fiscal devolution”. Mayors will receive 20% of business rates revenue from next year, and all business rates will be retained locally by the end of the decade. From 2028, mayors will also receive a share of income tax and some areas will be able to introduce overnight visitor levies. “Local leaders shouldn’t have to come cap in hand to Whitehall,” he said.
Public services and AI
An extra £500m goes to AI safety and security, and a new covenant sets tests that data centres must meet. AI investment in the civil service is meant to save a further £600m from back-office budgets, and a review of NHS productivity will look at cutting administrative work for staff.
Defence and Ukraine
Healey said the defence budget is £14bn higher than in the last year of the Conservative government. How the UK will meet its Nato commitment of 3.5% of GDP by 2035 will be set out in next year’s spending review, supported by a new defence finance taskforce.
Ukraine will receive £10bn of additional economic and military support, including £500m of urgent military funding this winter. Healey said he and the Prime Minister, Andy Burnham, had told President Zelensky that morning.
What comes next
The full Budget documents will show how the sums add up, and how much of the plan rests on tax collection measures that are hard to forecast. Decisions on defence spending, and on ringfencing money for prevention, now move to next year’s spending review.
