UK Budget 2026: council tax bands A-D to receive £100 energy payment

UK Chancellor John Healey has announced a £100 winter energy payment for approximately 20 mn households in council tax bands A-D as part of the UK Budget 2026, alongside measures to reduce household energy costs and reform gas and electricity bills.

The payment, confirmed on October 28, will be transferred directly into eligible households’ bank accounts this winter. It is intended to provide financial support as households face higher energy costs, with the typical annual energy bill forecast to reach approximately £2,000 from January 2027.

• Approximately 20 mn households in council tax bands A-D will receive a £100 winter energy payment directly into their bank accounts.
• Gas standing charges will be abolished for 23 mn homes from 2027, with around 60% of households expected to save an average of £45 annually.
• The government has extended electricity VAT relief until July 2027, while the OBR forecasts UK inflation of 3.4% next year.

The Budget also includes plans to abolish standing charges on gas bills for 23 mn homes, extend temporary VAT relief on electricity and maintain the 5p reduction in fuel duty until July 2027.

The announcements come as the Office for Budget Responsibility (OBR) has raised its inflation forecasts, predicting UK consumer price growth of 3.1% in 2026 and 3.4% in 2027.

Who will receive the £100 payment under council tax bands A-D?

The government’s £100 household energy payment will cover approximately 20 mn homes classified under council tax bands A, B, C and D.

The support is aimed at helping households manage winter energy costs and will be paid directly into bank accounts rather than deducted from council tax bills.

Council tax bands classify residential properties for local taxation purposes. The Budget uses these existing property classifications to identify households covered by the payment.

The announced payment applies to the following four bands:

• Council tax band A: £100 household energy payment.
• Council tax band B: £100 household energy payment.
• Council tax band C: £100 household energy payment.
• Council tax band D: £100 household energy payment.

The amount is the same across all four bands. The announcement does not establish payments for households in higher council tax bands.

Specific payment dates and any additional eligibility requirements have not been detailed in the information released with the Budget.

The £100 payment is separate from existing energy bill discounts and the planned removal of gas standing charges.

Gas standing charges to be removed for 23 mn households

Healey confirmed that the government intends to abolish fixed daily standing charges on household gas bills from 2027.

The reform will affect approximately 23 mn homes, with the Treasury estimating that around 60% of bill payers will save an average of £45 annually.

Standing charges are fixed fees paid regardless of gas consumption. They cover costs including metering services and government levies, meaning households that use very little gas still pay the same daily charge as those consuming substantially more.

Under the proposed changes, those costs will instead be incorporated into gas unit prices.

Households with lower gas consumption are expected to benefit, while those using larger amounts of gas could face slightly higher overall bills.

The Treasury said the reform would not require additional public spending.

“Gas standing charges are unfair and outdated,” Healey said, adding that the Budget would address an energy policy that had left households exposed to rising costs and global price shocks.

The chancellor will ask Ofgem, Great Britain’s energy regulator, to implement the changes next year or as soon as possible afterwards.

The government is also considering removing standing charges from electricity bills, although that process is expected to take longer.

Consumer campaigner Martin Lewis, founder of MoneySavingExpert.com, said he had discussed electricity standing charges with Healey and that the chancellor intended to raise the issue with Ofgem.

Electricity VAT relief extended until July 2027

The Budget extends the temporary suspension of VAT on household electricity bills until July 2027. The measure was introduced in October 2026 and had originally been scheduled to end in March 2027.

The initial VAT suspension reduced the typical annual electricity bill by approximately £45. Healey said the extension would take £50 off the annual energy price cap.

The government will also extend the existing 5p fuel duty reduction until July 2027.

Together with the £100 payment for households in council tax bands A-D, the measures are intended to ease the immediate financial pressure from higher energy prices.

The government is separately examining longer-term electricity market reforms, including options to reduce the influence of wholesale gas prices on electricity bills and changes to the way renewable electricity subsidies are funded.

How much could households save from the Budget 2026 energy measures?

The financial impact will depend on each household’s council tax band, gas consumption and electricity costs.

The main announced measures have different eligibility rules and financial effects.

The £100 winter payment is a direct household support measure, while gas standing charge reform changes how energy suppliers recover fixed costs.

Removing standing charges will not produce equal savings across all households. Higher gas users may pay more through increased unit rates, despite the removal of the daily fee.

Consumer groups have welcomed the proposed reform because households that ration their energy use could benefit from lower fixed costs.

Andrew Sissons, a director at research charity Nesta, said the removal would “provide relief to the poorest households who ration their gas”.

Simon Francis, coordinator of the End Fuel Poverty Coalition, said the change could also help prepayment customers avoid accumulating debt during periods of low gas consumption.

UK inflation forecasts add pressure to household budgets

The government’s energy measures arrive alongside a weaker inflation outlook.

The OBR now expects UK inflation to reach 3.1% in 2026, compared with its previous forecast of 2.3%. Inflation is projected to rise further to 3.4% in 2027 and return to the Bank of England’s 2% target only in 2030.

Higher oil and gas prices following the US-Israel conflict with Iran have contributed to the revised forecasts.

The Budget also includes a 3.9% increase in the national minimum wage and national living wage for approximately 2.3 mn workers, while retaining the £20,000 annual tax-free cash ISA allowance.

For households in council tax bands A-D, the most immediate measure is the £100 winter energy payment. Further potential savings will depend on individual energy consumption and the implementation of the gas standing charge reforms scheduled for 2027.

What the UK Budget 2026 means for household finances

The main immediate benefit for households in council tax bands A-D is the announced £100 energy payment, which will reach approximately 20 mn homes this winter.

For households with gas connections, a separate reform will remove the daily standing charge from 2027.

That change will not reduce bills equally for all customers. The Treasury expects about 60% of bill payers to save an average of £45 annually, while households consuming more gas may pay more because fixed costs will be incorporated into unit prices.

The electricity VAT extension and fuel duty reduction provide additional support, although both are scheduled to run only until July 2027.

The government’s longer-term proposals include changes to electricity pricing, support for low-carbon home improvements and reforms to energy market costs.

The OBR’s inflation outlook remains a central constraint on household finances, with prices projected to rise more quickly than previously expected through 2027.

The Budget therefore combines targeted winter payments, energy bill reforms and tax changes with a fiscal outlook in which inflation remains above the Bank of England’s target until 2030.