Budget 2026: what it could mean for your pay packet, mortgage and savings

How the chancellor’s tax, benefits and pension changes are likely to affect personal finances

Single graduate, first job

Josh finished university two years ago and has moved back to London. He earns £28,500 a year, paying £3,186 in income tax and £1,274 in national insurance contributions. That leaves him with take-home pay of £2,003 a month, or £24,040 a year. Although there has been criticism, the salary threshold for repaying his plan 2 student loan will stay frozen at £29,385 for three years from next April, so even a modest pay rise is likely to trigger repayments. Graduates must pay back 9% of earnings above the threshold.

Single average earner

Layla is a nurse earning the UK median wage of £41,000. She pays £5,684 in income tax and £2,274 in national insurance, leaving her with take-home pay of £2,753 a month, or £33,041 a year.

Income tax bands would normally rise with inflation, but they have been frozen until 2031. That means a larger share of earnings is taxed than would otherwise be the case.

With no changes to the “big three” taxes — income tax, national insurance and VAT — her finances should be broadly unchanged in 2027.

She is eligible for the £100 energy payment for households in England in council tax bands A-D, though council tax itself is devolved. Her energy costs should also be helped by the removal of standing charges on gas bills and the extension of the VAT cut on electricity until July.

Couple with two children

Simon is an accountant earning £65,000, while Maria makes £28,000 as a part-time teacher. Some of their child benefit is taken back through the high-income child benefit charge, which starts at £60,000. Together, they have take-home pay of £6,141 a month, or £73,690 a year.

Because there are no major tax changes, this budget does little to alter their overall position. Like many other households, they will benefit from the energy bill changes, and their band D home qualifies for the £100 payment.

Couple saving to buy a home

Tom and Martha teach in London and earn £45,000 and £50,000 respectively. Their combined take-home pay is £6,287 a month, or £75,439 a year. They rent and are eager to move onto the property ladder. With a joint income of £95,000, they qualify for the Your First Home scheme, which helps first-time buyers purchase a new-build home in England with a deposit as low as 2.5%. Applications are due to open in February, though eligibility is limited to households with annual income of £110,000 or less outside London, or £140,000 or less in London.

Affluent couple with one child

Lawyer Lucy earns £98,000 and civil servant Robert earns £48,000. After tax, their combined take-home pay is £8,790 a month, or £105,477 a year. At this income level, all of their child benefit is clawed back. Lucy is close to the £100,000 threshold, so any rise in her pay has significant tax consequences: for every £2 earned above that point, £1 of the £12,570 annual personal allowance is lost, meaning income between £100,000 and £125,140 is effectively taxed at 60%.

Their suburban home is in council tax band G, so they do not qualify for the £100 energy payment. On the other hand, they will benefit from the cancellation of a plan to reduce the annual cash Isa allowance for under-65s from £20,000 to £12,000 a year.

Low-income family

The Cooper family have three children and live in rented accommodation in Leicestershire, where they pay £995 a month. Paul works 35 hours a week in a distribution centre and is paid the national living wage for older workers, currently £12.71 an hour. His partner Hannah does not work. After tax, national insurance and his pension contribution, his take-home pay is £1,604 a month. That is topped up by monthly universal credit and child benefit payments worth a total of £1,989. They will benefit from the rise in the national living wage to £13.21 an hour in 2027 and will also receive the £100 energy payment.

Driver, self-employed courier

Maxine drives 25,000 miles a year delivering parcels and earns £40,000 as a self-employed courier. Earlier in the year, the government increased the tax-free mileage allowance for people who drive for work from 45p to 55p for each of the first 10,000 miles, producing a £200 saving for a basic-rate taxpayer. After tax — and that relief — she takes home £2,939 a month, or £35,273 a year. From April 2027, the government will raise the tax-deductible rate above 10,000 miles from 25p to 35p a mile, creating a further £300 in tax savings. The planned 5p rise in fuel duty that was due to begin next year has also been delayed again.

Single pensioner

When the new state pension rises in April next year, it will reach £13,036, which is above the £12,570 annual personal allowance. Peter’s only income is the new state pension, and at one point he appeared likely to owe £93 in income tax. However, the government is introducing a new “pension tax allowance” that will be applied automatically to remove this liability.

Affluent pensioner couple

Bob and Margaret receive a combined £60,000 from their state pensions and savings interest. After paying £4,572 in tax, their combined income works out at £4,619 a month, or £55,428 a year.

The biggest change for them is that the tax rate on savings income is rising by 4 percentage points to 24% in April. Their additional state pension income will also be taxable. Taken together, these changes will reduce their net income by £1,101 a year.

They have not yet started drawing from Bob’s private pension. From April, any money left in a defined contribution pension after death will be counted in inheritance calculations for the first time, so he is planning to withdraw some of the funds.

Business owner

Mo has spent 30 years building a successful chain of florists and now wants to retire. He hopes to sell the business, realising a £1 million gain that would be subject to capital gains tax. He qualifies for business asset disposal relief, which cuts the rate on that gain from 24% to 18%. But from April, the chancellor has reduced the allowance to £500,000, which would push his CGT bill up by £30,000 to about £210,000.