Chancellor John Healey's Budget will affect UK households differently depending on income and savings, with some groups gaining relief while others face substantially higher tax bills. The poorest pensioners will be spared income tax on their state pension, but those earning slightly more will have to pay. Meanwhile, lower income households will receive a £100 energy bill payment if they live in council tax bands A to D, a measure affecting about 20 million people, though experts say this falls far short of covering rising bills. At the same time, frozen tax thresholds will squeeze those on lower incomes, whilst more families risk being dragged into higher rate tax brackets.
Ruth Curtice, chief executive of the Resolution Foundation, described Healey's approach as 'scattergun'. She said: 'Cost of living support is being spread far too thinly and will leave even those families receiving help facing higher energy bills than they did during the last energy price shock.' The Budget includes plans to scrap standing charges on gas bills from next year, potentially saving households around £108 annually, though energy firms may shift these costs onto higher unit rates. This could benefit smaller households that ration their use but penalise larger families.
Savers and landlords will face significantly higher tax burdens from April 2027. Landlords will pay a 2 per cent additional rise in income tax on rental income, stacked on top of a previous 2 per cent increase, taking basic rate taxpayers to 24 per cent and higher rate taxpayers to 44 per cent. The Office for Budget Responsibility warned this policy will 'risk leading to a steady rise in rents'. Savers earning interest in non-Isa accounts will face the same 4 per cent income tax increase. Banks will also pay a 3 per cent rise in the surcharge on their profits, raising concerns among analysts that lenders will pass costs to customers through higher mortgage and loan rates.
The Budget contains measures to help first-time buyers and support working parents. The Your First Home scheme will enable people to purchase new-build properties with just a 2.5 per cent deposit backed by government equity loans. A new First Time Buyer Isa and a starter Isa for first-time investors were also announced. Paternity pay is being extended to at least 150,000 self-employed fathers and partners, offering £194.32 per week for up to two weeks. The threshold for side hustle earnings before tax kicks in will treble from £1,000 to £3,000.
For households, the Budget creates a mixed picture: those in lower council tax bands receive targeted energy support, but frozen tax thresholds will squeeze lower earners, whilst savers and landlords face significant new tax burdens that could ultimately push costs onto tenants and reduce savings incentives.