Budget gives households and pensioners relief as banks face higher tax

Chancellor John Healey announced household energy support and pensioner tax protection in his first budget on October 28, alongside higher taxes on banks and gambling machines. The Burnham government’s package combines immediate help with living costs and more targeted tax increases, rather than distributing benefits evenly across households and businesses.

Up to 20 million households in council tax bands A to D in England will qualify for a £100 energy payment in 2027, according to the Treasury. Scotland, Wales and Northern Ireland will receive funding for comparable support, leaving their governments to determine how that money is used.

Pensioners will receive a new tax allowance from April 2027, protecting those whose total income does not exceed the full new state pension. The Treasury says around 500,000 pensioners will benefit in 2027-28, including approximately 290,000 who will pay no income tax, with others receiving a tapered allowance.

Banks will help finance the relief through a temporary increase in their corporation tax surcharge from 3% to 6%. The Treasury expects the 15-month measure to raise £1.5 billion before ending on March 31, 2028, making lenders a significant source of funding for the household support.

Gambling operators also face a higher bill, with Machine Games Duty on higher-stakes machines increasing from 20% to 25%. Healey presented that increase as part of the funding for high-street support, while saying pubs and seaside arcades would be protected from the change.

Smaller retailers, hospitality operators and leisure businesses are among the beneficiaries on the business side. Reuters reported that increasing the business rates relief threshold from £12,000 to £18,000 would remove about 70,000 businesses from the charge, illustrating the shift in support towards smaller premises.

For savers, the outcome depends on where their money is held. Healey cancelled a planned reduction in the cash ISA allowance, retaining the £20,000 annual limit, but announced a further two-percentage-point increase in tax rates on savings and property income from April 2027. That creates contrasting outcomes for tax-protected savings and taxable returns.

The property income increase also puts landlords among those facing additional tax, rather than direct relief. Across the package, the distinction between winners and losers therefore depends not just on earnings, but on income sources and eligibility rules: a household receiving energy help may also face higher tax elsewhere.

Energy measures extend beyond the direct payment. Reuters reported that the temporary electricity VAT reduction would continue until July and that fuel duty relief would also be extended, offering wider support alongside the more narrowly targeted household payment. These measures address different bills, so their value will vary with household spending.

Implementation will now determine when the announced benefits reach recipients and how the new charges affect businesses. The Treasury says it will develop a proposed incentive for first-time stocks and shares ISA investors with industry, leaving that element unfinished. The budget’s eventual household impact will depend on those details as well as the scheduled tax changes.