Healey's first budget keeps income tax thresholds frozen
John Healey kept income tax thresholds frozen in his first budget as Chancellor of the Exchequer, the UK's senior finance minister, which he delivered on 28 October 2026. The Guardian reported that he also told parliament he would raise taxes on banks, gambling, and income for savers and landlords.
Income tax thresholds are the income levels at which different tax rates begin to apply. They had been frozen since April 2022, and the freeze continues under the new budget. The Guardian has published an interactive calculator that shows how the announcements affect individual users, and a separate tool estimates how much more tax a reader will pay as a result of the freeze.
Healey committed to two fiscal rules, the government's own limits on how it manages its money. The first requires day-to-day spending to be covered by tax receipts. The second requires government debt, measured as public sector net financial liabilities, to be falling as a share of GDP, the total value of goods and services produced in the economy, in the third year of the forecast. Reuters reported that Healey accepted a smaller fiscal buffer, meaning less room against those rules, after global shocks hit the economy.
The Office for Budget Responsibility, the body that produces the government's official forecasts, expects headroom of £15bn in 2029-30 and £22bn in 2030-31. Headroom is the margin left against the rules. Healey said the UK will spend £14bn more on debt interest, the cost of servicing government borrowing, this year.
The forecasts also project borrowing at 4.2% of GDP this year, falling to 3.4% next year and to 1.8% by 2030-31. Growth is expected at 1.2% this year and 1% next year, rising to 1.8% in 2029 before easing to 1.6% in 2031. Government debt is forecast at 83.2% of GDP this year and 83.8% next year, then falling to 81.7% in the later years shown.
Energy bills feature heavily in the package. The government extended a VAT cut, the tax added to most goods and services, through winter and spring to July, which takes £50 off the annual energy price cap, the limit on what suppliers can charge households. Standing charges, the fixed charge on gas bills, have been abolished for 23m homes, saving two-thirds of households an average of £45 a year.
Around 20m households in council tax bands A to D, the local property-based tax, were to receive a £100 energy payment paid directly into their bank accounts, at a cost of £2.6bn. The government also scrapped a levy on energy bills that funded hydrogen, and moved older renewables onto fixed-price contracts to cut bills.
Beyond household bills, the budget sets out that all mayors will receive income tax assignment from 2028, according to the government's announcement. The government also published its response to a call for evidence, a formal request for public views, on tax support for entrepreneurs.
