While the personal tax changes address individual tax liabilities, several announcements in the Budget focused directly on household support, especially for families, pensioners, and people with disabilities. These measures aim to ease financial pressures, particularly for vulnerable households.
Universal Credit: Removal of the two-child limit
A significant change to Universal Credit (UC) will come into effect in April 2026, with the removal of the two-child limit. This change will benefit an estimated 560,000 families, with each receiving an average increase of £5,310 in their benefits. The removal of the cap is expected to cost £3bn by 2029/30 and will significantly reduce child poverty among these families.
Personal Independence Payment (PIP)
The PIP policy, which had initially planned to tighten eligibility criteria for the daily living component, has now been reversed. This change is expected to cost an additional £3.9bn by 2029/30. By maintaining current eligibility thresholds, the decision ensures continued support for individuals with disabilities who rely on PIP for daily living costs.
Increased disability benefits spending
Spending on disability benefits is also expected to increase due to a rise in caseloads. With more individuals seeking support and higher average awards, the Government projects an additional £1.4bn in welfare spending by 2029/30.
Support for energy costs
In response to ongoing cost-of-living pressures, especially in relation to energy bills, the Government has implemented measures designed to ease this burden. The budget includes policies aimed at reducing CPI inflation by 0.3% in 2026, partly by lowering household energy bills. These reductions are expected to provide some relief to families facing high utility costs, which have been a major concern in recent years.
Rail fare and NHS prescription freeze
The Budget announced a freeze on regulated rail fares in England, marking the first such freeze in 30 years. This means that season tickets, peak-return fares for commuters, and off-peak returns between major cities will not rise next year.
For many households, this translates into real savings: some commuter journeys are likely to cost over £300 less per year than they would have under an inflation-linked fare rise.
The Budget also extended the freeze on NHS prescription charges in England, keeping the fee per item at £9.90 for 2026/27. This freeze also applies to three-month and annual prescription pre-payment certificates, helping to manage costs for people who rely on regular medication.
How these changes affect households
For households, the combination of higher taxes and increased welfare spending creates a complex financial picture. While many families may experience a higher tax burden, particularly due to the freezing of tax thresholds and increased taxes on savings and dividends, there will be some relief for vulnerable groups.
The removal of the two-child limit in Universal Credit, along with increased welfare payments for pensioners and people with disabilities, will offer substantial financial support to families facing the highest levels of financial hardship.
Meanwhile, the increased NI contributions on salary-sacrificed pensions and the higher property taxes on high-value homes will particularly impact middle to upper-income families.
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