28th October 2026
The Chancellor has presented his Budget as a way of helping households through a difficult period while keeping control of public finances. But the money for energy support, investment and other commitments has to come from somewhere.
Rather than announce a single broad increase in income tax, John Healey is relying on a mixture of higher taxes on selected activities, changes affecting savings and property income, tighter tax enforcement and decisions about which businesses receive relief.
The approach raises an important question: who will ultimately pay, and how much extra revenue will the measures actually produce?
Banks asked to contribute
One of the clearest measures is a temporary increase in the Bank Corporation Tax Surcharge from 3% to 6% for 15 months, ending on 31 March 2028.
The Government says the additional revenue will help fund energy-bill support for households. It is a targeted measure rather than a permanent increase in the general rate of Corporation Tax.
Banks are being asked to contribute because the Government wants to finance immediate help without imposing a broad tax increase on households.
The banking industry may argue that additional taxes make the UK less attractive for investment or could affect lending. Whether customers ultimately pay some of the cost through lower savings rates, higher borrowing costs or fees will depend on how individual banks respond.
The important point is that the surcharge is temporary. It provides revenue for a defined period, rather than establishing a permanent source of funding for recurring government commitments.
Gambling taxes and the high street
The Budget also increases Machine Games Duty on certain higher-stakes gaming machines from 20% to 25%, while protecting pubs and seaside arcades from the change.
The measure targets a particular form of gambling rather than every betting transaction. It may raise revenue, but the final yield will depend on the number of machines affected, their profitability and whether operators change their businesses in response.
The Government must also consider the consequences for employment and premises. If operators close outlets or reduce activity, some of the expected revenue could be lost.
The wider principle is that taxation can serve more than one purpose. It can raise money, but it can also discourage activities that the Government believes have social costs.
Savings and property income
The Budget includes a further two-percentage-point increase in tax rates on savings income and property income from April 2027.
This is particularly relevant to people receiving interest from taxable savings or rental income. The impact will depend on their income, tax band, allowances and the precise rules applying to each type of income.
It is important not to confuse this with the Cash ISA allowance. The Chancellor's reported decision to retain the £20,000 annual Cash ISA limit means eligible savings held within a Cash ISA continue to benefit from the ISA's tax-free treatment. Tax changes affecting savings income outside tax-free accounts are a separate matter.
Landlords may face higher tax bills on their taxable rental income, potentially affecting the returns from letting property. Some may absorb the increase, while others could review rents, investment or maintenance spending. The outcome will vary by property and local market.
Business reliefs are being reshaped
The Budget changes several business tax arrangements, including the threshold for Business Asset Disposal Relief, which is being reduced from £1 million to £500,000.
The Government says three-quarters of claimants will see no change, but those planning to sell a qualifying business could face a different tax outcome depending on the size and nature of their gain.
The Budget also excludes vape shops and adult gaming centres from certain business-rate reliefs in England. This is not the same as imposing a new tax on every vape shop. It means that affected premises will not receive relief available to qualifying businesses.
For Scotland, business rates are devolved, so the impact will depend on decisions taken by the Scottish Government.
These measures illustrate how governments can raise revenue indirectly by withdrawing reliefs or limiting tax advantages rather than increasing a headline tax rate.
Online marketplaces and unpaid tax
The Government is also strengthening requirements on online marketplaces to help prevent sellers avoiding VAT.
This matters because established high-street businesses must comply with tax rules, while some online sellers have been able to operate in ways that make enforcement more difficult.
Better collection of tax already due can increase receipts without raising the standard VAT rate. It can also improve fairness between businesses competing for the same customers.
However, the revenue depends on the scale of non-compliance and how effectively HMRC can enforce the rules. An announcement of stronger powers is not itself proof that the full expected amount will be collected.
The same principle applies to wider efforts to recover overdue tax. Improving compliance may be worthwhile, but forecasts should distinguish money that is realistically recoverable from sums that are difficult or impossible to collect.
Can these measures fund the Government's plans?
The Chancellor says the Budget is fully funded over the forecast period and that the Government will meet its fiscal rules. The independent Office for Budget Responsibility provides the essential test of those claims.
Its forecasts examine how much the Government expects to collect, how much it plans to spend, how borrowing and debt will change, and how much room remains if the economy performs worse than expected.
There is an important difference between temporary revenue and permanent revenue. A tax increase that lasts 15 months can help pay for a temporary support package. It cannot automatically finance a permanent spending commitment once the tax increase ends.
There is also a difference between raising a tax rate and collecting tax more effectively. Higher rates may change business and consumer behaviour, while stronger enforcement seeks to collect money already owed.
Both can contribute to the public finances, but neither should be judged by the headline announcement alone.
Who ultimately pays?
The immediate legal taxpayer is not always the person who bears the full economic cost. Banks may adjust their prices, businesses may change investment plans, and landlords may review rents. Equally, companies may absorb some of the cost through lower profits.
The Government's challenge is to raise sufficient revenue without weakening investment, employment or economic growth.
For households, the question is whether the support provided outweighs any indirect costs they face. For businesses, it is whether the tax system remains predictable enough to support long-term decisions.
The Budget's success will therefore depend not just on how much the Treasury expects to collect, but on whether the measures deliver the forecast revenue and how the costs are distributed across the economy.
The figures from the OBR will be crucial. They should help establish how much each measure is expected to raise, whether the sums add up and how much protection the Government has left against another economic shock.
The central question is simple: can the Chancellor pay for today's support without creating tomorrow's financial problem?
Sources: HM Treasury's Budget 2026 announcement; Reuters' Budget report; Office for Budget Responsibility.