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Macro EconomyMedium•28 October 2026•
3 min read

UK Budget Offers £100 Energy Boost to Up to 20 Million Households

Key Facts

1The £100 energy payment targets up to 20 million eligible households in England, starting in January 2027.
2The National Living Wage will rise by 3.9% to £13.21 an hour on 1 April 2027.
3The Office for Budget Responsibility raised its forecast for UK economic growth in 2026 to 1.2%.
4The Energy Profits Levy will remain at 38% until 31 March 2030, with the possibility of ending earlier if the Energy Security Investment Mechanism condition is met.

Chancellor John Healey announced the UK budget on 28 October 2026, including a £100 energy payment for up to 20 million households in England. Payments will begin in January 2027, and eligibility is limited to households in council tax bands A to D. The Treasury said devolved governments would receive funding for similar support. Energy cost relief measures include extending the temporary 0% VAT rate on eligible domestic electricity supplies in Great Britain. The cut will be extended by a further three months, to July 2027.

The Treasury expects the extension of the zero tax rate to lower Ofgem’s annual price cap by about £50 in April 2027. The support comes as UK inflation reached 3.5%, its highest level in about a year, with fuel prices rising in connection with the war in Iran, according to the Associated Press. On wages, the National Living Wage will rise by 3.9% to £13.21 an hour on 1 April 2027. The Treasury said the increase amounts to £910 a year in gross income for a full-time worker paid at that rate. The new wage rate will therefore take effect months after the budget announcement, not immediately.

In return for measures to support households, the budget temporarily raises the surcharge on banks’ profits from 3% to 6%. The higher rate will apply for 15 months from 1 January 2027, and the Treasury says it will fund measures to give households some breathing room. Oil and gas companies will remain subject to the Energy Profits Levy at a rate of 38% until 31 March 2030. Treasury rates show the tax applies at this rate from 1 November 2024 to 31 March 2030. The government plans to replace it thereafter with the Oil and Gas Revenue Levy, with the current tax potentially ending before then if the Energy Security Investment Mechanism condition is met.

The Office for Budget Responsibility raised its forecast for UK economic growth in 2026 to 1.2%, after gross domestic product grew by 0.7% in the three months to August. The updated annual growth estimate is compared with the performance in the latest three-month period available in Treasury data. On public finances, the office expects a current budget surplus of £15 billion in 2029-30. That compares with a surplus of £4 billion forecast for the third year in the 2025 budget. The projected fiscal headroom rises to £22 billion in 2030-31, according to the office’s forecasts.

The first-time buyer support package included the Your First Home scheme, announced before the budget, which offers a targeted 2.5% deposit backed by a 20% government equity loan for new homes. The government is also introducing a First Time Buyer ISA for new savers from 6 April 2029, replacing the Lifetime ISA for this group. The new account will allow contributions of up to £4,000 a year, with a 25% government bonus when funds are withdrawn to buy an eligible first home. From 29 October 2026, the Lifetime ISA withdrawal charge will fall from 25% to 20% for first-time buyers purchasing a property priced above £450,000. In its labour market and price forecasts, the Office for Budget Responsibility expects unemployment to reach 5.1% in the second quarter of 2027 before falling to 4.1% by the end of the forecast horizon in 2031, and inflation to peak at 3.8% in the first quarter of 2027 before returning to the 2% target in the third quarter of 2028.