Introduction
The Autumn Budget (October 28, 2026) speech was the first for new Chancellor, John Healey, under a new Prime Minister, Andy Burnham. It was delivered against a backdrop of limited economic growth, a cost-of-living crisis and instability on the international stage.
Government debt has reached around £3 trillion, the highest it has been since the 1960s. Higher borrowing costs have reduced the government's fiscal room for manoeuvre and the Treasury's financial headroom was expected to be much tighter than previously forecast. Labour stated it would still not break its self-imposed fiscal rules.
The Chancellor had remained tight-lipped in the lead up to the Budget, with very little indication as to what type of Budget this would be. Many expected him to roll out "small, safe and steady" measures to try and help with the cost of living but also to protect the new Chancellor and Prime Minister's positions given what was deemed to bring down their predecessors.
Speculators believed Mr Healey would try to offer targeted cost-of-living help without breaking fiscal rules, but with limited money available middle earners would be likely to continue facing higher tax burdens and fiscal drag. The Budget was, in the end, presented as a balancing act between economic credibility, support for households, and funding priorities such as defence and investment.
This Budget has aimed to provide "breathing space" for millions by pledging everyday fixes to ease household pressures. 98 decisions were announced (more than in the previous two Budgets under Labour), but with a relatively small fiscal impact overall.
It has been labelled as having a "steady as she goes" approach. Due to "global economic storms", particularly the recent war in the Middle East, inflation has risen, as has the cost of paying off the National Debt (predicted to be £14bn more than last year). Despite this, the Government says it will reduce its financial headroom from £24bn to £15bn by 2029/30.
A summary of the major changes follows below:
Minimum Wage and National Living Wage increase from April 2027
16-17-year-olds and apprentices see a rise from £8.00 to £8.31 an hour.
Workers aged 18 to 20 receive a 3.9% increase to £11.27 an hour.
Over 21s will get an additional 50p an hour, making their minimum wage £13.21.
Income Tax
There has been no movement on Labour's promise to freeze income tax. This means that the rates and thresholds for 2027/28 will be as follows:
For England and Wales:
Personal allowance: 0% (first £12,570 earned)
Basic tax rate: 20% (annual earnings up to £50,270)
Higher tax rate: 40% (from £50,270 to £125,140)
Additional tax rate: 45% (Above £125,140)
For Scotland:
Starter tax rate: 19% (Up to £2,827)
Basic tax rate: 20% (from £2,828 to £14,921)
Intermediate tax rate: 21% (from £14,922 to £31,092)
Higher tax rate: 42% (from £31,093 to £62,430)
Advanced tax rate: 45% (from £62,431 to £125,140)
Top tax rate: 48% (above £125,140)
Income Tax and National Insurance thresholds
The threshold freeze will remain extended until 2030-31.
Trading Allowance
The trading allowance will triple from April 2027 to £3k. This means if you have a gross trading income of less than £3k, you will not need to file a Self-assessment tax return.
VAT
VAT on domestic electricity bills will remain at 0% (introduced on October 1 2026) until July 2027 (extended from March 2027). Other VAT rates will remain at the existing levels for 2027/28.
All land sold to social housing providers will be VAT-free from next year.
Corporation Tax
Corporation Tax remains at 25%. The small profits rate and marginal relief will also stay as they are. As will R&D reliefs.
Capital Gains Tax
From April 2027 the threshold for business asset disposal relief (BADR) will be reduced from £1m to £500k. It is believed this will mean "no change for three in four claimants".
The first-year allowance will increase from 40% to 50% from April 2027.
The Chancellor announced a new "Founders' Relief" whereby the rate of CGT on qualifying disposals of shares (up to a lifetime cap of £10m) will be 10%. It is designed to support business founders and significant early investors in high-growth, innovative UK companies, aiming to incentivize these types of businesses to start, scale and stay in the UK.
Inheritance Tax Thresholds
The IHT nil-rate bands will remain unchanged until April 2031.
Pensions
The Chancellor confirmed the previously announced changes to the triple lock on pensions (to take effect in 2030). He also stated that pensioners with income up to the value of the full new state pension will not pay income tax "in this Parliament".
Income from Savings, Dividends and Property
Tax on savings interest and property income was already due to rise by two percentage points across all tax bands in April 2027. It will now rise by four percentage points to 24% (basic rate), 44% (higher rate) and 49% (additional rate).
ISAs
The Government has decided not to proceed with the proposed changes announced in the last Budget. The annual investment limit anyone can invest in either a cash or stocks and shares ISA will stay at 20k.
The Chancellor said he will also work with the sector on a new "Starter ISA" to help make investment more accessible.
The First Time Buyer ISA will replace the Lifetime ISA for new savers from 6 April 2029.
Council Tax
Whilst there is no change to the council tax rate bands, those whose properties are in Bands A to D will receive a £100 'household energy payment' this winter. It will be paid directly into bank accounts for help with rising energy bills, Mr Healey says. This is costed as a £2.6bn scheme, affecting 20m homes.
Business Rates
Small business rate relief will be increased from £12k to £18k. This means 70,000 businesses will be taken out of paying business rates altogether, according to Mr Healey.
Fuel Duty & Mileage Rates
The Chancellor has announced a further extension of the 5p fuel duty cut until next July. Mr Healey says for those who need cars for work, he's increasing the higher mileage rate from 25p to 35p per mile and making permanent the increase to the standard mileage rate.
Gambling Tax
Following the increase in the Remote Gaming Duty in April 2026 from 21% to 40%, and online betting seeing a new duty of 25% starting in April 2027, it was announced that there would be an Increase on gambling tax to 25% for higher stakes machines.
Energy Bills
The Standing Charge on residential gas bills will be scrapped sometime in 2027, affecting some 23m households.
Summary of other announcements
Tax increase on the banks
The Bank Corporation Tax Surcharge will increase from 3% to 6% for 15 months from 1 January 2027 to 31 March 2028 which will be "time-limited" to pay for immediate support on energy bills. This is considerably lower than was expected, resulting in an increase in share prices of several of the major banks.
Reforming the tax system and collecting tax owed
Mr Healey says he is reforming the administration of self-assessment income tax, bringing those affected in line with the majority so they make "smaller, more regular payments instead of facing larger bills that are harder to pay".
He is giving the tax office funding "to improve compliance, and stronger powers to collect overdue tax from those who can clearly afford to pay but ignore repeated contact".
Supporting Entrepreneurs
The Chancellor is launching a new young entrepreneurs' allowance, which will cover a year of living costs for young founders "while they turn their ideas into businesses".
He's also announcing a new scale-up programme to female founders, adding that the British Business Bank will double its commitments to women-led businesses in funds to £200m.
Given the risks of building a company, the government should recognise that success and keep those people in the UK. The newly announced Founders' Relief, mentioned above, is aimed to support this. An extra £20.4bn investment for the national wealth fund was also pledged.
Fiscal Devolution
Regional mayors are to receive a share of Income Tax raised in their catchment areas from 2028. 20% of business rate revenue will stay in the area it is generated from next year, rising to 100% by the end of the decade
There is also to be a new "good growth fund" for regional mayors. Mr Healey describes it as the "biggest wave of devolution in a generation, driving good growth in every postcode". |
