Chancellor John Healey has delivered his first Budget, raising the minimum wage to £13.20 an hour and cutting help with energy bills for millions of households. The Budget, announced on Wednesday, is built around easing the cost of living while trying to rebuild the government’s finances.
Healey told MPs his plan would give people “breathing space for today and fresh hope for the future”. The Office for Budget Responsibility (OBR) forecast the economy will grow by 1.2 per cent this year, 1.1 per cent next year and 1.6 per cent in 2028.
Wages and pensions rise
The National Living Wage for workers aged 21 and over rises by almost 4 per cent, from £12.71 to £13.20 an hour. The government says around 2.3 million of the lowest-paid workers will benefit. The minimum wage for 18 to 20-year-olds rises from £10.85 to £11.27 an hour.
The full state pension will rise by 3.9 per cent to £13,036 a year from next April. Because that rise would push many pensioners above the £12,570 tax-free personal allowance, the tax-free allowance for low-income pensioners has been raised to £13,036 so they do not pay tax on their pension for the first time.
Energy bills and fuel
On energy, the VAT cut on electricity bills will be extended to July, taking £50 off the annual price cap. Households in council tax bands A to D will also receive a £100 household energy payment. Gas standing charges, the fixed daily fee on bills, will be scrapped.
Drivers also get relief. The 5p-a-litre cut in fuel duty has been extended to July 2027, and the tax-free mileage rate rises from 25p to 35p a mile.
Help for businesses
For businesses, the threshold for business-rates relief rises from £12,000 to £18,000, taking a further 70,000 businesses out of paying rates. Around 10,000 businesses will get a 25 per cent discount on their electricity bills from next April.
Healey had already announced £20.4 billion of support for a state business lender and an infrastructure bank, plus tariff cuts on more than 100 imported grocery and supply-chain goods. To help pay for the measures, banks face changes to the bank surcharge expected to raise around £2 billion a year, and online marketplaces such as Amazon and Temu face a crackdown on VAT dodging by foreign sellers.
Government borrowing is forecast to fall to 4.2 per cent of GDP this year, then 3.4 per cent next year and 2.9 per cent in 2028-29, according to the OBR.
Read more of our Business coverage, including UK Budget 2026: What to Watch as Chancellor John Healey Prepares Wednesday’s Statement.
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