UK Budget 2026: what was announced for benefits, the State Pension and tax
The Office for Budget Responsibility has confirmed the government is meeting its stability and investment rules, with a £15 billion buffer against the stability rule, the Budget document says.
The State Pension will keep rising each year by the highest of 2.5%, inflation or earnings growth through to April 2029, HM Treasury’s Budget 2026 document says, though it gives no cash figure for April 2027.
Chancellor John Healey presented the Budget to Parliament on 28 October 2026, according to GOV.UK’s Budget 2026 page.
GOV.UK had not published a 2027-28 rates table for benefits and pensions when checked on 29 October 2026. The Universal Credit measure in the document’s list of decisions is the surplus earnings threshold, and the document gives no April 2027 payment rate.
| Measure | What changes | When |
|---|---|---|
| State Pension | Highest of 2.5%, inflation or earnings growth; no cash rate given | Each April to April 2029 |
| Pension Tax Allowance | No Income Tax up to the full new State Pension | 6 April 2027 to 5 April 2030 |
| Universal Credit | £2,500 surplus earnings threshold kept in Great Britain | Until the end of March 2028 |
| Carer’s Allowance | Taper replaces the cliff edge | Planned for 2030-31 |
| Savings and property income | Tax rates rise by a further two percentage points | 6 April 2027 |
| National Living Wage | Rises by 3.9% to £13.21 an hour | 1 April 2027 |
| Household Energy Payment | £100 in council tax bands A to D in England | From January 2027 |
| VAT cut on electricity | Extended | To 1 July 2027 |
| Fuel duty | 5p cut extended | To 1 July 2027 |
| Bank Corporation Tax Surcharge | Rises from 3% to 6% | 1 January 2027 to 31 March 2028 |
Around 500,000 pensioners are set to benefit from the Pension Tax Allowance in 2027-28, HM Treasury says. Around 290,000 of them will pay no tax at all, and the remainder will receive a tapered allowance.
The triple lock is to be adjusted from April 2030, so that the State Pension rises each year by the highest of 2.5%, inflation, or the amount required to maintain its value relative to earnings as reached in April 2029.
Carer’s Allowance will taper away on earnings above the Weekly Earnings Limit instead of ending at once, but the taper is planned for 2030-31 and will apply in England and Wales.
The document says there is no increase to the headline rates of income tax, National Insurance contributions, or VAT. Tax rates on savings income and property income rise by a further two percentage points, however, and GOV.UK’s Budget announcement says 84% of taxpayers will see no increase in their tax bill.
The National Living Wage will rise by 3.9% to £13.21 an hour on 1 April 2027. That is an increase of £910 in the gross annual earnings of a full-time worker.
The Household Energy Payment is a £2.6bn scheme. It pays £100 to up to 20 million households in England from January 2027. The VAT cut on electricity bills is expected to take around £50 off the Ofgem annual price cap in April 2027.
The Bank Corporation Tax Surcharge rises from 3% to 6% for 15 months, helping to pay for the energy support. It is due to raise £1.5bn before it ends on 31 March 2028.
The document also confirms a £1.5bn borrowing facility for mayoral strategic authorities in England, due to be operational by April 2028. It sets out £285m for 2027-28. Of that, £165m helps places with a mayor establish Good Growth Funds, and £120m is incubator capital for areas moving towards a devolution deal or strategic authority status.
Questions and answers
Does the £100 payment apply outside England?
The £100 payment is for households in England. The devolved governments will receive their share of the funding through the Barnett formula, which the document says will enable them to provide similar support.
Did the Budget change the Personal Allowance or the income tax bands?
The document’s income tax decisions cover savings and property income rates and the Pension Tax Allowance. It does not set out a change to the Personal Allowance or the band thresholds.
