Budget 2026: £100 energy payment, fuel duty cut extended and business rates relief

The Chancellor, John Healey, has delivered his first Budget, promising families and businesses "breathing space" from rising costs with a £100 energy payment for millions of households, a longer fuel duty cut and lower business rates for high street firms.

Mr Healey said the Budget would help with everyday bills while keeping the public finances on track, with the government cutting borrowing and meeting its fiscal rules with a buffer against uncertainty.

Help with energy bills

In 2027, up to 20 million households in council tax bands A to D in England will receive a £100 Household Energy Payment, with funding for similar support across the rest of the UK. The temporary VAT cut on electricity bills will be extended until 1 July 2027, which the Treasury says will take around £50 off the annual price cap in April 2027.

The payments will be funded by doubling the Bank Corporation Tax Surcharge from 3 per cent to 6 per cent for 15 months. The government will also ask Ofgem to abolish gas standing charges and move the cost into unit rates, and a planned tax on gas bills to fund hydrogen will be scrapped.

Drivers and workers

The 5p cut in fuel duty is extended for a further six months, and the planned inflation-linked rise is delayed until 1 July 2027. The Treasury says that, compared with the previous government's plans, petrol and diesel will be 15p a litre cheaper from April 2027. Prices at lower-powered public electric vehicle chargers will also be cut, saving drivers who rely on them about £150 a year on average.

From 1 April 2027 the National Living Wage will rise by 3.9 per cent to £13.21 an hour, worth £910 a year to a full-time worker.

Homes and high streets

A new Your First Home Scheme aims to help 70,000 people onto the property ladder, and a First Time Buyer ISA will offer a simpler way to save for a deposit. A further £1.5 billion goes to social and affordable housing, and £432 million over two years to help people sleeping rough.

For businesses, all retail, hospitality and leisure properties in England will see their business rates frozen in real terms, reduced or cut to zero.

Everyday costs

The Budget confirms the "everyday fixes" announced on Monday, including the removal of tariffs on more than 100 products such as baked beans and chocolate, 1,000 Post Office parcel drop boxes, and parental pay extended to more than 160,000 extra parents. A new Warm Homes loans scheme will help households spread the cost of solar panels, batteries and heat pumps, which the government says together could cut bills by up to £550 a year.

What it means for Birmingham

Households in council tax bands A to D in Birmingham will be among those eligible for the £100 energy payment, and the city's shops, pubs and restaurants stand to benefit from the business rates package. As always with a Budget, the full effect on households will depend on the detail, and on what happens to prices over the coming year.