Households in council tax bands A to D in England will receive a one-off £100 payment from January to help with soaring energy bills, funded by extra tax on banks. Chancellor John Healey described the move as offering "breathing space" as prices rise faster than expected, with typical annual energy bills forecast to increase by around £400 to £2,100 in January. Scotland, Wales and Northern Ireland will receive equivalent funding and decide whether to introduce the same payment. Although designated for energy bills, recipients can spend the money on anything they wish.
The government is also extending the VAT cut on electricity bills, which was introduced in October and was due to end in April, through to July. Gas standing charges - the fixed daily fees for connecting to supply - will be scrapped next year in England, Scotland and Wales, with the costs shifted onto the price per unit of energy. The Treasury estimates that 60 per cent of households will save an average of £45 a year, though higher users in larger homes or larger low-income families will pay more. The temporary 5p cut in fuel duty on petrol and diesel, introduced in 2022, will also be extended to July rather than phased out from January, keeping the levy at 52.95p per litre.
The Chancellor has scrapped plans to reduce the annual tax-free savings allowance in Individual Savings Accounts from £20,000 to £12,000 for under-65s from April 2027, instead introducing a new "Starter Isa" for first-time investors. However, savings tax rates will rise by four percentage points from April, to 24 per cent for basic rate taxpayers and 44 per cent for higher-rate taxpayers, on interest received beyond the £1,000 and £500 annual allowances respectively. The Office for Budget Responsibility warned that tax measures on landlords could collectively risk leading to steady rises in rents.
The National Living Wage for eligible workers aged 21 and over will increase to £13.21 an hour from £12.71, while those aged 18 to 20 will see the minimum wage rise to £11.27 from £10.85. Younger workers aged 16 and 17 will receive £8.31 an hour, up from £8, matching the new apprentice rate. These rises represent no progress on Labour's manifesto promise to narrow the gap between older and younger worker wages. The state pension will rise by 3.9 per cent under the triple lock policy, with the flat-rate pension for those reaching state pension age after April 2016 rising to £250.70 a week.
The government has confirmed plans for a new First Time Buyer Isa to replace the criticised Lifetime Isa, and the penalty for withdrawing Lifetime Isa savings when buying a home above the £450,000 threshold will be scrapped. The Your First Home equity scheme will allow first-time buyers in England to purchase new-build homes with a 2.5 per cent deposit, with a government loan worth 20 per cent of the property's value. The Chancellor is tripling the allowance for side income from £1,000 to £3,000 annually before reporting to HMRC. Student loan rates remain under review, with the Plan 2 repayment threshold staying at £29,385 from April and frozen for three years.
For savers, borrowers, pensioners and workers, the Budget means higher tax on some savings from April but protection from income tax on state pension income until at least 2030, higher minimum wages but continued income tax threshold freezes that could drag some pay rises into higher brackets, and some immediate help with energy and fuel costs but larger bills still expected in January.