Budget sets out £100 energy payment as bills are forecast to rise

The Budget announced a £100 payment towards energy costs for eligible households in England, alongside changes to standing charges, fuel duty, savings allowances and pensions. The measures come as household energy bills are forecast to rise sharply in January.

The payment, called the Household Energy Payment, is intended for 20 million homes in council tax bands A to D in England. It will be paid automatically into bank accounts and funded through extra tax on banks, Chancellor John Healey said. Scotland, Wales and Northern Ireland will receive equivalent funding and decide whether to introduce a similar payment.

The Budget also extends a cut to VAT on electricity bills until July; it had been due to end in April. Ofgem price-cap tariffs are forecast to push a typical annual bill to about £2,000 or more in January, although the precise amount will depend on the tariff and household use.

Changes to energy and fuel costs

Gas standing charges are to be scrapped in England, Scotland and Wales during 2027, or as soon as possible afterwards. The fixed daily fees will instead be added to the price charged for each unit of gas. The Treasury estimates that 60% of households will gain an average of £45 a year, with lower users benefiting most. Households using more gas will pay more than they do now.

The 5p-a-litre cut in fuel duty on petrol and diesel will remain until July. It had been scheduled to start being phased out in January.

Pay, pensions and savings

Minimum wage rates are due to rise by 3.9% in April. Income tax thresholds remain frozen, meaning that a pay rise could leave some people paying tax on a greater share of their income or moving into a higher tax band. Scotland has separate income tax bands.

The state pension will also rise by 3.9% under the triple lock. The full new state pension will become £250.70 a week, or £13,036.40 a year; the basic state pension will rise to £192.10 a week, or £9,989.20 a year. A new Pension Tax Allowance is intended to keep people whose only income is the state pension from paying income tax until at least 2030.

The government has dropped plans to limit under-65s to saving £12,000 a year in cash Isas from April 2027. The annual tax-free cash Isa allowance will remain £20,000. A new Starter Isa for first-time investors is planned.

Healey also confirmed plans for a First Time Buyer Isa to replace the Lifetime Isa. Separately, a scheme for first-time buyers in England would allow them to purchase a new-build home with a 2.5% deposit, supported by a loan worth 20% of the property’s value.