HM Treasury announces Budget 2026 with energy bill cuts and fuel duty freezes
On 28 October 2026, Chancellor of the Exchequer John Healey presented Budget 2026 to Parliament on behalf of HM Treasury. The announcement focuses on short-term financial relief for households and businesses facing higher living costs driven by global conflicts and rising energy prices. Key measures include a £100 direct energy payment this winter for 20 million households in council tax bands A to D, alongside an extension of the VAT cut on electricity through July 2026 to reduce annual price caps by £50. The Treasury also extended the 5p fuel duty cut to July 2026, raised the National Minimum Wage and National Living Wage by 3.9%, and promised to remove standing charges from household gas bills next year. These decisions affect millions of everyday household budgets, motorist expenses, and small business running costs across the United Kingdom while the government aims to keep public borrowing on a downward path.
What was announced
HM Treasury announced several direct cost-of-living interventions alongside its latest economic forecasts. For households, the government extended the reduced Value Added Tax (VAT), a consumption tax added to goods and services, on electricity through to July 2026. A £2.6 billion scheme will also provide a direct £100 payment this winter to 20 million households in council tax bands A to D. Furthermore, the Chancellor extended the 5p fuel duty discount through July 2026 and raised the higher mileage rate for work driving from 25p to 35p per mile.
For workers and pensioners, HM Treasury raised the National Minimum Wage and National Living Wage by 3.9%, affecting 2.3 million workers. It established a Pension Tax Allowance ensuring pensioners with incomes up to the full new State Pension pay no income tax during this Parliament. The government also announced plans to end the strict earnings threshold cliff edge for Carer's Allowance, suspended tariffs on over 100 supermarket items, and committed £15 million to children's book charities.
What it means
The measures give targeted financial support to families, motorists, and low-income earners struggling with elevated oil and gas prices. A typical household in council tax bands A to D receives £100 directly, alongside reduced VAT on electricity that cuts annual bill caps by about £50. Drivers will pay lower fuel taxes at the pump until mid-2026, while care workers and engineers using personal cars for work can claim higher mileage rates.
Businesses also receive temporary relief. Around 10,000 industrial firms will get a 25% discount on electricity bills under the British Industrial Competitiveness Scheme from April 2026, with backdated payments covering energy costs from this year.
What the announcement does not tell us
The announcement does not explain exactly when or how the £100 energy payments will reach bank accounts. It also lacks details on the specific mechanism Ofgem will use to remove standing charges from gas bills next year, or when electricity standing charges will be addressed. Additionally, the speech mentions upcoming action on job advert pay transparency without setting out a timeline or draft legislation. Finally, the speech does not state how much money individual carers can earn before losing Carer's Allowance under the promised reform.
How this was written
This analysis was written with AI from the official announcement below, using only facts that announcement states. The quoted wording is gov.uk: HM Treasury’s own. Always check the original before acting on anything here.
Budget 2026 speech as delivered by Chancellor John Healey.
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