Budget

Fiscal headroom rises to £21.7bn

The Chancellor enters this year’s Budget with more room to manoeuvre than previously expected. Updated figures from the Office for Budget Responsibility, briefly published online ahead of the speech, show fiscal headroom rising to £21.7 billion. This is around £12 billion more than forecast in March, giving the Government a larger buffer against unexpected economic pressures.

The OBR has also revised its growth outlook. UK economic growth for this year is now estimated at 1.5 per cent, reflecting a stronger-than-expected start to the year. However, the forecast for 2026 has been reduced to 1.4 per cent, down from the 1.9 per cent projection made in March.

Personal Tax

Income tax thresholds frozen until 2030–31

Income tax and National Insurance thresholds will remain frozen for an extra three years, keeping

  • Personal allowance: £12,570
  • Higher-rate threshold: £50,270
  • Additional-rate threshold: £125,140
    This extended freeze is expected to raise around £8bn by 2029–30 due to fiscal drag.

Dividend, savings and property income tax increasing by 2 percentage points

Tax rates applied to dividend income, savings income and property income will increase by 2 percentage points.

This measure is expected to raise around £2.1bn per year.

Salary sacrifice pension NIC reforms

From April 2029, any salary-sacrificed pension contributions above £2,000 per year will lose their National Insurance exemption.

The OBR expects this to raise around £4.7bn in 2029–30.

Personal Finances

National Minimum Wage rising from April 2026

  • Age 21+: £12.71 per hour
  • Age 18–20: £10.85 per hour
  • Age 16–17 and apprentices: £8.00 per hour

Prescription charges frozen for 2026/27

Prescription costs in England will remain at £9.90.
Prepayment certificates will also stay at:

  • 3-month PPC: £32.05
  • 12-month PPC: £114.50

Fuel duty 5p cut extended to September 2026

The current 5p cut will continue until September 2026.

Staged increases will begin later in 2026, as planned.

Energy bills to fall by £150

The Government will scrap the ECO energy scheme, reducing the average household energy bill by around £150 from April 2026.

Allowances & Savings

Cash ISA rule change

The overall ISA limit remains £20,000, but from April 2027:

  • A maximum of £12,000 can be held in a cash ISA
  • The remaining £8,000 must go into investment products
  • Over-65s will retain the full £20,000 cash ISA allowance

State Pension rising by 4.8% from April 2026

State Pension rising by 4.8% from April 2026

  • New State Pension: £241.30 per week
  • Basic State Pension: £184.90 per week

This uplift reflects the 4.8% rise under the triple lock.

Help to Save scheme made permanent and expanded

Help to Save will become a permanent scheme, with eligibility extended to 1.5 million additional low-income workers from 2028.

Business Tax & Investment

Writing down allowance reduced

The main writing down allowance rate falls from 18% to 14% from 2026, alongside a new 40% first-year allowance.

Expected to raise £1.5bn.

Reduced CGT relief for Employee Ownership Trusts

Relief reduced from 100% to 50% on disposals to EOTs.

Estimated to raise £900m annually.

Lower business rates for retail, hospitality and leisure

More than 750,000 properties will see reduced business rates.

This will be funded by higher rates on larger sites valued above £500,000.

Property & Council Tax

Council tax surcharge on high-value homes

From 2028, an annual surcharge will apply to higher-value residential properties in England:

  • Homes over £2m: £2,500 per year
  • Homes over £5m: £7,500 per year

This measure is expected to raise around £400m a year by 2031.

Vehicles & Transport

Electric vehicle mileage charge from 2028

A new mileage-based charge will apply from April 2028:

  • Electric vehicles: 3p per mile
  • Plug-in hybrids: 1.5p per mile

Revenue from this reform will support road maintenance and the expansion of EV charging infrastructure.

Rail fares frozen until March 2027

Regulated rail fares in England will be frozen until March 2027, the first long-term freeze in more than 30 years.

Welfare & Social Policy

Two-child benefit cap removed from April 2026

The two-child limit in Universal Credit will be removed from April 2026.

This is expected to cost around £3bn and support approximately 560,000 families.

Reversal of earlier welfare cuts

The Government will reverse previously announced changes to winter fuel payments and health-related benefits.

These reversals are expected to cost around £7bn in 2029–30.

£820m Youth Guarantee programme

A new £820m programme, delivered over three years, will expand access to apprenticeships, skills training and employment support for 18–21-year-olds.

Motability scheme reform

The Motability scheme will remove luxury vehicles from eligibility, refocusing support on cost-effective mobility options for disabled people.

Infected Blood compensation exempt from inheritance tax

Compensation payments made through the Infected Blood Scheme will be fully exempt from inheritance tax, regardless of how they are passed on.

Other Revenue Measures

Gambling duties increasing

Gambling duties increasing

  • Remote Gaming Duty: rising from 21% to 40%
  • Online betting duty: rising from 15% to 25%
  • Bingo Duty: abolished from April 2026

These measures are expected to raise around £1bn per year by 2031.

Electric vehicle reforms

Additional EV-related tax changes, including the new road pricing system, are expected to raise around £1.4bn.

Tax administration and compliance measures

Enhanced compliance work and improved debt collection are forecast to generate around £2.3bn.

Other taxes

A package of further measures, including a Sizewell C levy, is expected to raise around £4.4bn.

Market Snapshot

UK markets saw brief volatility following the early release of OBR documentation.

10-year gilt yields eased as investors responded to revised growth forecasts and the confirmed package of tax measures.

The pound briefly strengthened before stabilising.