Chancellor imposes £1.5bn tax on banks to fund £13,036 pension boost

Chancellor John Healey announced that banks will pay an additional £1.5 billion to the Treasury over the next 15 months. This extra revenue is generated by temporarily doubling the corporation tax surcharge on the sector from 3% to 6%. The levy was previously suggested to reach 8%, but the government settled on the lower rate to stabilize the financial sector while raising funds for other household measures.

The most visible benefit for households is a rise in the state pension. Starting next April, the weekly payment will increase to £13,036. At the same time, pensioners will receive a new matching personal allowance. This change shields all income received up to that level from income tax, providing immediate relief for retirees.

The budget includes a £100 cash payment for residents in council tax bands A through D to offset winter energy costs. This guarantee begins in England in January, with other UK regions receiving funding to implement similar schemes. The payment targets lower-income households, though the Resolution Foundation notes that 1.4 million of the poorest families in bands E and above will not receive the rebate.

The government is also adjusting taxes on the gambling and property sectors. Slot machine tax will rise from 20% to 25% for stakes of £1 or more starting in April 2027. In the property market, buy-to-let landlords will face higher taxes on rental income. The Office for Budget Responsibility warns that these increases may push landlords out of the market and contribute to steady rent rises for private tenants.

Savers outside of Individual Savings Accounts will see their tax rates increase further. Basic-rate taxpayers will pay 24% on interest once their tax-free allowance is exhausted, while higher-rate taxpayers will pay 44%. Healey reversed a previous announcement that would have cut cash ISA allowances, keeping the current limit for savers under 65. Healey also introduced a new allowance for young entrepreneurs in England to support living costs during their first year in business.

Other measures include a £100 million subsidy for on-street electric vehicle charging, which is expected to save drivers about £150 annually. The budget also removes tariffs on more than 100 products, including marmalade, gherkins, and garlic. The Your First Home scheme will allow households earning up to £140,000 in London and £110,000 elsewhere in England to buy newbuild properties with a deposit of just 2.5%.