Budget 2026: Healey hikes taxes on banks and landlords to fund £100 handouts to 20m households

John Healey announced a one-off £100 winter payment as the centrepiece of a wider cost-of-living package. It is intended to give households breathing space as energy bills rise, mortgage costs increase, and inflation threatens living standards. The payment will be sent to all English households in council tax bands A to D.

That means eligibility is based on the council tax band of the home, not on an individual income test described in the article. The government expects the scheme to reach about 20 million families. It also includes funding for Scotland and Wales, although Healey said he hoped their governments would create similar schemes.

The payment is planned for the winter and should help households through to spring. However, critics said it was poorly targeted because richer households in the eligible bands will also receive it, while the poorest households could have received more generous support. The OBR still expects a difficult winter, with inflation approaching 4% and little growth in disposable income.

Council tax bands classify homes according to their assessed property values. In England, band A is the lowest band, while bands B and C cover progressively higher values, and band D is above them. The bands are not personal income categories. They describe the home used for council tax purposes.

Healey’s scheme uses bands A to D as an eligibility cutoff. This creates a broad rule that can be applied to households across England without separately checking every family’s income or energy bill. It also explains why the payment may reach people with different financial circumstances. The article says all English households in those bands will receive £100.

The choice has prompted criticism. The Resolution Foundation said the support was badly targeted and that more help should have gone to the poorest consumers. The article does not give the exact property-value thresholds for each band, but it makes clear that band D is the highest band included in the payment scheme.

The package costs £2.6bn, including money for Scotland and Wales. The £100 payment is expected to reach about 20 million families, although the article says the devolved governments are only being encouraged to introduce similar schemes. The English eligibility rule covers households in council tax bands A to D.

The main funding source is a higher additional levy on banks’ profits. That levy will double to 6%, but only for 15 months. Other funding comes from an unexpected 2p increase in tax rates on income earned from property or savings. These changes affect landlords and savers, not just banks.

The article does not state the total extra amount that banks and other taxpayers will provide. It gives the tax rates and the package cost, but not a combined revenue forecast. Banks had feared a larger rise, and their share prices were among the biggest risers in the FTSE 100 after the announcement.

A higher tax bill can reduce the return landlords receive from renting out a property. If owning and letting homes becomes less attractive, some landlords may leave the market. That matters because fewer available homes can make it harder for tenants to find accommodation.

The article identifies two possible mechanisms. Landlords may pass the extra tax on through higher rents. Alternatively, they may sell their properties and invest elsewhere, reducing the number of homes available to rent. The OBR warned that the tax change could lead to a steady rise in rents by deterring landlords and cutting supply.

The effect is especially significant during a wider household squeeze. Mortgage bills are already rising because interest rates are higher, while energy costs are expected to increase. Laura Suter said rent hikes could help landlords offset the tax, but also warned that more landlords might sell up instead.

Oil and gas prices affect household budgets directly through energy bills and indirectly through the cost of transport, heating, and goods. The article links rising prices to the war in Iran and says inflation could approach 4%. When prices rise faster than incomes, families can buy less with their money.

Interest rates add another pressure. Households with mortgages face higher monthly bills, while the government generally pays more to service debt when borrowing costs rise. Higher inflation can also increase the cost of government programmes and weaken real household incomes. The article says the OBR expects virtually no growth in disposable income.

These pressures make support more expensive and tax decisions harder. Healey offered £100 payments and extended a VAT cut on electricity, but stressed his fiscal rules. The OBR cut its growth forecast for next year to 1%, showing why the government faces limited financial flexibility.

Fiscal rules are government limits for managing borrowing, debt, or the balance between tax receipts and spending. Their purpose is to reassure lenders and keep public finances sustainable. The article says Healey was careful to show that Labour was sticking to its self-imposed rules because bond markets were unsettled.

“Headroom” means the gap between the government’s forecast position and the limit set by a fiscal rule. If that gap were £15bn, the forecast would have £15bn of room before reaching the rule’s boundary. It would not mean the government had £15bn in cash available for spending. It would be a forecast margin.

The article itself does not state that Healey had £15bn of headroom, nor does it specify the detailed rules. Higher inflation, interest rates, and weaker growth can quickly reduce such a margin. That makes large new commitments riskier, even when the government remains within its stated limits.

A government can support households by spending more, cutting taxes, or providing direct payments. Taxes fund that support, while borrowing covers the difference when spending exceeds revenues. Borrowing can protect families during a crisis, but it adds to debt and future interest costs. The government therefore tries to balance immediate relief with long-term affordability.

Healey’s package shows this trade-off. The £100 payment costs £2.6bn, while the government will raise money through a higher bank levy and increased taxes on property and savings income. It also cancelled planned fuel-tax rises and extended a VAT cut on electricity, measures that reduce some revenue or costs.

Economic growth makes the balance easier because stronger activity can raise tax receipts and reduce pressure on support. The OBR instead expects only 1% growth next year and virtually no growth in disposable income. That weak outlook limits room for spending without more borrowing or higher taxes.