What is the Budget?
The Budget is the Chancellor's yearly statement to the House of Commons setting out the government's tax and spending plans. On the same day, the independent Office for Budget Responsibility (OBR) publishes its forecasts for the economy and public finances, so everyone can check whether the numbers add up.
Why this Budget was different
It was the first fiscal event since Andy Burnham replaced Keir Starmer as Prime Minister in July 2026. Burnham made John Healey — who had resigned as Defence Secretary in June over defence funding — his Chancellor in place of Rachel Reeves.
It also came against a difficult background: an energy price shock linked to the Middle East war, higher borrowing costs and slow growth.
What it means for you
| If you are… | What changed |
|---|---|
| A household on a tight budget | £100 for about 20 million homes in council tax bands A–D; the VAT cut on electricity extended to July (about £50 off the price cap); gas standing charges to be scrapped in future |
| A driver | The 5p cut in fuel duty extended to July |
| A pensioner | A new allowance so pensioners whose income is no more than the full new state pension pay no income tax; the triple lock changes from 2030, rising with inflation or 2.5% but no longer with earnings |
| A saver | The planned cut to the Cash ISA limit is dropped — it stays at £20,000; a new First Time Buyer ISA replaces the Lifetime ISA, plus a new Starter ISA for first-time investors |
| On the minimum wage | Up 3.9%, with the National Living Wage rising to £13.21 an hour |
| A carer | The Carer's Allowance earnings "cliff edge" is removed |
| A small shop, pub or café | Small business rate relief threshold raised from £12,000 to £18,000 |
| A business owner selling up | Business Asset Disposal Relief limit halved to £500,000; a new 10% "Founder's Relief" for lifetime gains up to £10m |
Who pays more?
- Banks: a temporary extra 3% bank surcharge for 15 months from January.
- Gambling: tax on higher-stake gaming machines rises from 20% to 25%.
- Companies and self-employed people will pay some taxes earlier — one of the biggest revenue-raisers, according to the Institute for Fiscal Studies.
- Most workers see no rise in tax rates, but income tax and National Insurance thresholds stay frozen, so more people gradually pay more as wages rise.
Defence and public spending
Healey promised the Defence Investment Plan will be "fully funded" by moving money from other capital budgets, with defence spending aiming for 3% of GDP by 2030 and 3.5% by 2035. He also announced £10 billion of extra support for Ukraine, £1.5 billion for social and affordable housing and £430 million to tackle rough sleeping.
The numbers behind it
- "Headroom" — the safety margin against the government's borrowing rule — is about £15 billion in 2029–30, according to the OBR.
- The economy is forecast to grow 1.2% in 2026 and 1.0% in 2027.
- Taxes are set to reach 37.9% of GDP in 2027–28 — the highest since records began in 1948.
Who wins and who loses?
The Resolution Foundation think tank says the cost-of-living help is spread thin: the poorer half of households gains about £158 on average, barely more than the richer half (£144). It warns that more than a million private-renting families lose out from a continued freeze in housing benefit rates, and that typical working-age incomes are set to fall about 3% over the next two years.
The Institute for Fiscal Studies said the overall tax increase was small, and much of the extra borrowing this year comes from giveaways. Pension experts called it "pensioner-friendly".
Healey says he kept Labour's promise not to raise tax on working people. Critics point out that frozen thresholds mean many people will still pay more.
Sources: HM Treasury Budget speech and Budget documents (28 Oct 2026); OBR Economic and fiscal outlook; Full Fact; LBC; PA via Yahoo News; Resolution Foundation; Institute for Fiscal Studies; Money Marketing. This article is general information, not financial advice.
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