UK Budget Day: Healey Banks on Bank Tax to Fund Cost of Living Help

Update: Healey delivers his first Budget, bank surcharge doubles to 6 percent and 20 million households get a 100 pound energy payment

Updated 14:20 UTC, Oct. 28, 2026. Chancellor John Healey has delivered his first Budget in the House of Commons. The bank surcharge on profits above the set threshold rises from 3 percent to 6 percent from January, for 15 months only, Reuters reported. The rise is smaller than the 8 percent lenders had feared, and shares in HSBC, Barclays, Lloyds and NatWest rose on the day, with Barclays, NatWest and Lloyds up around 4 percent, Reuters reported.

The surcharge helps fund a 2.6 billion pound energy bills support package. About 20 million households in council tax bands A to D will get a 100 pound payment from the government this winter, the Press Association reported. Healey also announced the removal of fixed gas standing charges from household energy bills, an extension of the VAT cut on electricity, and an extension of the 5p fuel duty cut, the Treasury said.

The Office for Budget Responsibility raised its growth forecast for 2026 to 1.2 percent from 1.1 percent in March, and cut the forecast for 2027 to 1.0 percent from 1.6 percent, the Press Association reported. Reuters reported that the fiscal headroom stood at 15 billion pounds in 2029/30, in line with expectations but below the 23.6 billion pounds recorded in March, and that markets took the Budget in their stride, with the pound down 0.1 percent against the dollar and the FTSE 100 up 0.1 percent.

Healey said an increase in gambling taxes would pay for business rates relief for high street firms, and that 70,000 businesses would be taken out of paying rates altogether, the Press Association reported. The Times live coverage reported that tax rates on income from property and interest on savings will rise by a further two percentage points from next April, with no change to tax on dividend income or employment income.

Britain's finance minister John Healey will deliver his first Budget at lunchtime on Wednesday, October 28, and he has set the tone in advance: steady, small and funded by the banks. Healey wants a calm fiscal event after the large tax packages of his predecessor Rachel Reeves, and the biggest revenue raiser in the package is expected to be a tax raid on banks. That money is set to fund a targeted and temporary package of support on the cost of living.

In a video message released late on Tuesday night, Healey promised targeted support for businesses and self employed people and action on energy costs. He said the package would provide breathing space for today and fresh hope for the future, and that Britain needed to become more resilient to global shocks. He said conflicts abroad were pushing up energy prices and living costs, and he promised to back British businesses and entrepreneurs and to shift power out of Whitehall so local leaders could drive growth in every postcode.

What is in, and what has been ruled out

Healey has rejected calls to raise capital gains tax. Senior allies of Prime Minister Andy Burnham, including cabinet ministers, had pressed for a rise on the sale of second homes, shares and other assets. Healey ruled it out after warnings that a higher rate could cost the Treasury money if wealthy people left the UK or delayed sales. The rate for higher rate taxpayers stands at 24 percent, against up to 45 percent on income.

He has also ruled out lowering the mansion tax threshold from 2 million pounds to 1.5 million pounds. The surcharge on homes worth more than 2 million pounds, between 2,500 and 7,500 pounds a year, begins in April 2028. Lowering the threshold would have raised the number of homes hit from 134,000 to 271,000, and Healey judged that changing the rules before the tax starts would risk public support for the reform.

One reversal is expected on savings. The Financial Times reported that Healey is set to cancel the planned cut in the annual cash ISA allowance, from 20,000 pounds to 12,000 pounds, which Reeves announced in her last Budget in November 2025. The anti avoidance measures built around the cut would also be dropped under the reported plan.

Tight numbers behind the speech

Britain's annual inflation rate reached 3.5 percent in September, the highest in nearly a year, helped by surging diesel costs at the pump. Borrowing costs have climbed, which leaves Healey little room. Some relief measures have already been announced, including cuts to tariffs on more than 100 imported goods and an expansion of parental pay. The government also approved drilling in the North Sea Jackdaw gas field last week and announced a 600 million pound package of investment in AI safety and biosecurity over the weekend.

Alexander Harvey, UK economist at Oxford Economics, set out the scale of the day. He said: This budget will largely be a stopgap that will tide the government over before a more significant policy overhaul in 2027. He added that the measures will be fairly small scale ones to ease the cost of living, as well as other relatively low cost policies.

Markets will read the Budget alongside the Office for Budget Responsibility forecasts published with it. The gilt market cares about the borrowing path, and bank shares will react to the size of the levy. The full measures land at lunchtime, and the opposition response follows in the Commons the same afternoon.