Autumn Budget - what employers need to know

The much-trailed Autumn Budget contained few surprises for employers, but did set out changes which will create headaches for businesses struggling in a difficult economic climate.   Some key takeaways for employers: 

• Income tax and national insurance thresholds are to be frozen until 2031, which will in practice bring over a million more workers into the tax system (and around 750,000 will become higher rate taxpayers) due to inflation and other upwards cost pressures.
• Salary sacrifice pension contributions above a £2,000 threshold will be subject to national insurance contributions from April 2029 (as ordinary pension contributions currently are), substantially reducing the attractiveness of salary sacrifice schemes for higher earners in the longer-term.   In the short term, employers may see more workers keen to take advantage of the current tax treatment of salary sacrifice schemes before the changes kick in.
• National minimum wage rates are set to rise in April 2026. The National Living Wage for workers aged 21 and over will increase 4.1 per cent from £12.21 to £12.71 per hour, and the rate for workers aged between 18 and 20 will increase by  8.5 per cent  from £10 to £10.85 an hour.  
• There will be a range of changes to the apprenticeship levy scheme, with most of the benefits targeted at small and medium sized employers.  In particular, SMEs will be eligible for free apprenticeship funding for workers under the age of 25. 

The salary sacrifice changes will require employers to look carefully at their contractual terms and payroll arrangements, particularly where they have passed the national insurance savings onto employees in the form of additional employer contributions.   Although employers will have a lead-in time to get changes to systems and terms in place, they will need to plan this carefully, bearing in mind legal obligations to consult about pension changes and changes to employment contracts (as well as the restrictions on “fire and rehire” in the forthcoming Employment Rights Bill).

We are partnering with Citygate Financial Planning for an event on 4 December 2025 at our offices, looking at how employers can structure their benefits offering to mitigate the impact of the Budget and offer a competitive package while managing costs pressures.   If you'd like to attend, please email alexandra.mizzi@howardkennedy.com.