UK Budget 2026: higher bank tax, a £100 energy payment and a bigger side-hustle allowance

The essentials: Chancellor John Healey delivered his first Budget on Wednesday, October 28, 2026. Banks will pay a higher tax on their profits for 15 months, and the money will help pay for a £100 energy payment for about 20 million households in England this winter. Income tax rates do not change, but the trading allowance for small side incomes triples to £3,000 from April 2027, and tax on savings and rental income goes up.

Why are banks paying more?

The bank surcharge is an extra tax that banks pay on top of the 25% corporation tax. It is currently 3%. Healey is raising it by 3 points, to 6%, from January 2027 for 15 months, according to Unbiased. Scottish Financial News reports that it applies to bank profits above £100 million.

The Chancellor linked the rise directly to energy bills. “And so banks will pay an extra 3% on the bank surcharge. This will be time-limited, to pay for immediate support on energy bills, starting in January, ending 15 months later,” he told MPs, as quoted by Scottish Financial News. He added: “amid global economic storms, I am looking to our banks to help fund breathing space for British families.”

JPMorgan Chase criticised the move. “To single out this industry for additional taxes again, one of the UK’s biggest generators of growth and jobs, lacks principle,” the bank said in a statement quoted by Scottish Financial News. Bank shares still rose on the day: Barclays gained 2.5%, NatWest 2.4% and Lloyds 1.9%, because the increase was smaller than markets had feared and is temporary, according to the same outlet.

What help is there with energy bills?

The main measure is a £2.6 billion Household Energy Payment. According to Unbiased, up to 20 million households in England in council tax bands A to D will receive £100 from January 2027, paid through their council tax. The devolved governments of Scotland, Wales and Northern Ireland will receive funding to offer similar support. Healey said the payment was designed “to take the pressure off in the coldest months and see people through to the spring,” Euronews reports.

Other energy measures listed by Unbiased:

• the 0% VAT rate on household electricity is extended until July 2027;
• Ofgem is asked to abolish gas standing charges, which average £108 a year, with the end of 2027 as the target;
• the 5p cut in fuel duty is extended until July 2027.

What changes for workers, savers and side hustles?

Measure	What changes	From
Income tax	No change to rates; personal allowance stays at £12,570 and thresholds remain frozen until the end of 2030/31	Already in place
Trading allowance	Rises from £1,000 to £3,000	6 April 2027
Tax on savings and property income	2 more points: 24%, 44% and 49%	April 2027
Cash ISA	The planned £12,000 cap for under-65s is dropped; the overall limit stays at £20,000	—
National Living Wage	£13.21 an hour (+3.9%)	1 April 2027
Bank surcharge	From 3% to 6% for 15 months	January 2027
Homes worth £2 million or more (England)	New surcharge of £2,500 a year, up to £7,500 above £5 million	April 2028

Sources: Unbiased, Scottish Financial News.

The trading allowance lets people earn a small amount from self-employment or occasional activities without paying tax or declaring it, up to the limit. Raising it to £3,000 is aimed at people with small side incomes, such as online sellers, tutors or occasional freelancers.

Savers and landlords lose out. Tax rates on savings interest and property income were already due to rise to 22%, 42% and 47%; they will now reach 24%, 44% and 49% from April 2027, according to Unbiased. Interest earned in a cash ISA remains tax-free, and Scottish Financial News describes the decision to keep the full cash ISA allowance as a U-turn on a planned cut.

For first-time buyers, a new First Time Buyer ISA will replace the Lifetime ISA. “For every young person who is working hard, saving what they can, and dreaming of their first home, I’m taking action,” Healey said, according to Euronews. Unbiased reports that it opens to new savers in April 2029, with a 25% government bonus on up to £4,000 a year, for homes worth up to £450,000.

Pensioners whose only income is the full new state pension will not pay income tax. Scottish Financial News says the state pension rises to £13,036 from April, above the £12,570 personal allowance. Unbiased says the exemption applies from 6 April 2027 to 5 April 2030.

What do the forecasts say about the economy?

According to Euronews, the economy is expected to grow by 1.2% in 2026 and by 1.0% in 2027, down from the 1.6% the government forecast for 2027 in March. Scottish Financial News reports borrowing of 4.2% of GDP this year, falling to 3.4% next year and 2.1% in 2029/30. The government has £15 billion of headroom against its fiscal rule in 2029/30, rising to £22 billion in 2030/31.

How did the opposition react?

Conservative leader Kemi Badenoch opposed the package. “No, I do not support the action that they are taking today,” she said in the Commons, according to Scottish Financial News. Gail Boag, chief executive of the accountancy body ICAS, said short-term measures were “no substitute for a credible, detailed, long-term plan for growth”.

What happens next?

Most tax changes still need to pass through Parliament in a Finance Bill, and details may change, Unbiased notes. The first measures take effect in January 2027, with the bank surcharge and the £100 energy payment. The trading allowance, the savings tax rise and the new National Living Wage follow in April 2027.