The Autumn Budget 2025, announced on 26 November, introduces several measures that will significantly impact employers over the coming years. Below is a summary of the key points you need to be aware of:
- National Minimum & Living Wage Increases
- From April 2026, the National Living Wage for over-21s will rise to £12.71 an hour, with proportional increases for younger workers:
- 18 to 20 year olds: £10.85/hour
- Under 18/apprentices: £8/hour
- Freeze on Income Tax & NIC Thresholds
- Tax and National Insurance thresholds will remain frozen until April 2031, meaning more employees will move into higher tax bands through normal pay progression.
Employers should anticipate increased salary review pressure for staff.
- Pension Salary Sacrifice Changes
- From April 2029, only the first £2,000 of salary-sacrifice pension contributions will be exempt from NICs. Contributions above this will attract NICs, increasing costs for employers and higher earners. This may require restructuring reward packages and updating payroll systems.
- Apprenticeship & Youth Employment Support
- Free funding for SMEs to offer apprenticeships to under 25s.
- £820m investment in a Youth Guarantee scheme for long-term unemployed young people.
What Should Employers Do Now?
- Model payroll impact for 2026 wage increases and NIC changes.
- Review reward structures and pension arrangements ahead of 2029.
- Update HR policies for upcoming Employment Rights Bill reforms.
- Communicate clearly with employees about tax and pay changes.
If you’d like a detailed impact analysis for your organisation or help with policy updates and workforce planning, please get in ilock@qandalaw.co.uk.
