Chancellor John Healey has pledged to make Great Britain 'growth Britain again' as he gears up for his first Autumn Budget. It is Healey’s belief that growth is the only way to combat cost increases for both businesses and the public. He says he wants the UK to become a 'country of wealth creation', with government policy geared towards building confidence in British business. Growth is the 'first economic priority' of this government, Mr Healey adds.
The Chancellor will deliver the first full Budget of Andy Burnham's government on 28 October. It arrives at a pivotal moment for UK businesses: energy costs are rising, high streets are under pressure and questions about tax continue to circulate.
According to insurance broker Simply Business’s SME Insights Report 2026, 36% of business owners believe the UK economy will probably worsen in 2026, so the Budget will be watched keenly for positive signs.
Growth underpinned by fiscal discipline
Mr Healey has declined to respond to speculation about tax rises ahead of the Budget but has pledged to maintain fiscal discipline.
He said: 'On my first day in the Treasury, I said that fiscal discipline was my first priority as Chancellor. It underwrites every promise this government makes.'
He says he and the Prime Minister are 'in lockstep' in their commitment to meeting the fiscal rules, from balancing the books with a buffer against uncertainty to controlling, borrowing and bearing down on inflation.
A tough economic backdrop
The Budget lands against a challenging picture. Mr Healey has warned it will be tough, as the US-Iran war continues to hit growth, inflation and borrowing costs. Government borrowing jumped in the run-up to the Budget, reflecting lenders' concerns about the inflationary impact of the conflict.
The Chancellor told the Financial Times that he is nonetheless determined that the UK will emerge from the Budget with a solid buffer against uncertainty, though he declined to say how much fiscal headroom he plans to maintain. Economists have predicted that the fiscal buffer built up in the previous Budget will be squeezed by these inflationary pressures, which could limit the government's wider spending ambitions.
Mr Healey has also confirmed the UK will still hit its Nato commitment of raising defence spending to 3.5% of GDP by 2035, with detail to follow at next year's spending review. Separately, changes to the Treasury's Green Book will lower the 'discount rate' used to assess public spending from 3.5% to 3%, making it easier to justify long-term investment in regional infrastructure such as schools and roads.
What has already been confirmed
Some measures are already locked in ahead of the Budget. The Simply Business SME report also found that 35% of business owners rank high running costs, such as energy bills, as one of their biggest challenges.
From 1 October 2026, VAT on household electricity bills drops from 5% to 0%, saving the average home around £45 a year. Small businesses, charities and residential care homes that already qualify for the reduced 5% rate through the existing VAT certificate and declaration process will also benefit from the new 0% rate. The cut is funded for the 2026/27 financial year, and the government has said it will 'keep looking' at what more it can do on energy bills.
Pubs, social clubs and live music venues will see a 20% cut to business rates from April 2027, on top of the 15% relief already in place for 2026/27. The government expects nearly 32,000 businesses to benefit, saving the typical pub an estimated £1,100 in its first year.
Further ahead, from 6 April 2027, most unused pension funds and pension death benefits will be included within a person's estate for Inheritance Tax (IHT) purposes. Personal representatives will become liable for reporting and paying any IHT due, with the government estimating that around 10,500 estates will face a new liability and a further 38,500 will pay more than before.
Honouring the manifesto pledge
No increase to the rates of Income Tax, VAT or National Insurance contributions (NICs) is expected. Mr Burnham has committed to honouring Labour's 2024 manifesto pledge not to raise these three taxes for the rest of this Parliament, which together account for nearly 60% of total tax receipts.
However, Mr Burnham has acknowledged the country is in a 'challenging position' and has not ruled out other tax rises. Capital Gains Tax (CGT) is one area to watch - rates last changed in October 2024. They currently range from 18% to 24%, depending on the band.
The Autumn Budget
The Chancellor will deliver the Autumn Budget to Parliament on 28 October.
Whatever changes are made, Mercia’s tax experts will be watching and will provide detailed analysis of the day's announcements.