3 min read
Chancellor John Healey announced a range of measures in the 2026 UK Budget on 28 October. They include changes to savings tax, support for pensioners and an extension of the fuel duty cut. Some measures take effect immediately, while others will be introduced from April 2027 or later.
Here are the main announcements that could affect your finances.
Savings: cash ISA allowance protected
The government has confirmed that the annual cash ISA allowance will remain at £20,000, reversing plans to reduce it. This means savers can continue to put up to £20,000 a year into cash ISAs without paying tax on the interest earned.
However, from April 2027, income tax rates on savings interest outside tax-free allowances will increase by two percentage points across all tax bands. The impact will depend on your income, how much interest you earn and whether you have unused tax-free allowances.
The Budget also introduces a new First Time Buyer ISA from 2029, replacing the Lifetime ISA for new savers. It also reduces the Lifetime ISA withdrawal charge for eligible first-time buyers purchasing homes above the existing £450,000 price cap.
The government will also explore a new ISA incentive for people investing in a stocks and shares ISA for the first time.
Pensions: support for pensioners
From April 2027, a new Pension Tax Allowance will help protect pensioners whose total income is at or below the full new State Pension from having to pay income tax. Those with slightly higher incomes may also benefit from a tapered allowance.
The Budget also includes changes to the tax treatment of certain pension lump-sum death benefits. A rule which meant beneficiaries could be liable for tax where payments were made more than two years after the member's death will be removed.
Motoring: fuel duty cut extended
Drivers will continue to benefit from the temporary 5p-per-litre fuel duty cut, which has been extended until 1 July 2027. The planned inflation-linked increase has also been deferred until that date.
There is further support for people who drive their own cars or vans for work. Tax-free mileage rates will be increased, including a rate of 35p per mile for business travel above 10,000 miles a year.
The government is also committing £100 million over two years to help reduce the cost of using local, lower-powered public electric vehicle chargers. This could save drivers who rely on these chargers around £150 a year on average.
Energy bills: £100 payment for millions of households
The Budget includes several measures aimed at easing pressure on household energy bills. From January 2027, eligible households in England in Council Tax bands A to D will receive a £100 Household Energy Payment.
The government is also extending the removal of VAT from domestic electricity bills until July 2027. It also plans to remove gas standing charges from 2027, although these costs will be reflected in unit rates instead.
Comment and reaction
Speaking on Radio 4’s Today programme, Chancellor John Healey said: "I do want to be honest with people, government can never remove completely the cost of living pressures that people feel - we can help where we can and that's what I'm doing."
Responding to the Budget, Conservative leader Kemi Badenoch said the government had "overspent, overborrowed, overtaxed and [is] drowning in an out-of-control welfare system".