The 2025 autumn budget got off to a chaotic start, with the Office for Budget Responsibility (OBR) releasing part of the forecast early.

Henry Zeffman, BBC chief political correspondent, commented: “The budget already exists thanks to the mistake of the Office for Budget Responsibility. It is truly extraordinary. An hour ago, this would have been unimaginable. It is difficult to find the right adjectives to do it justice.”

Nonetheless, Chancellor Rachel Reeves then presented the highly anticipated Budget, setting out a series of measures that are expected to have a significant impact on businesses across the UK.

Reeves began his speech by saying: “These budget measures are the right choices for a fairer, stronger and more secure Britain.”

Below, we’ve summarized some of the key points from the 2025 fall budget, detailing the potential implications for HR and payroll.

Minimum wage rate from April 2026

The Chancellor confirmed that the Government had accepted the Low Pay Commission’s recommendations regarding minimum wage rates:

• From April 2026, the National Living Wage (NLW) for over-21s will increase to £12.71 an hour.
• As for the National Minimum Wage (NMW), for 18-20 year olds it will increase to £10.85 an hour.
• For 16-17 year olds their NMW will increase to £8 an hour

Our Director of Human Resources Consulting, Dan Grace, commented: “A further increase in the NLW and NMW will result in continued increases in costs for businesses in the UK. This could lead to further economic impacts and possible changes to the cost of living due to price increases to account for higher wages.”

Freezing tax thresholds

The Budget confirmed a freeze on income tax and national insurance thresholds for a further three years from 2028, continuing the freeze implemented by the previous government.

Reeves said she is “asking everyone to do their bit” as the thresholds will remain frozen at their current level until 2031.

Dearbail Jordan, senior business and economics journalist at the BBC, commented: “The tax threshold freeze that Reeves just announced is not a surprise. What is shocking is that it will remain in effect for three years instead of the planned two years. This means that by 2031, tax thresholds will have been frozen for almost a decade.”

Increase in state pensions

The Chancellor confirmed that the state pension will increase in April 2026 based on average earnings.

This means:

• The new flat-rate state pension for those who reached state pension age after April 2016, the amount will increase from £230.25 to £241.30.
• The old basic state pension for those who reached state pension age before April 2016, the amount will increase from £176.45 to £184.90.

Grace commented: “There are fears that the triple lock system will be detrimental to the budget and drive the UK into bankruptcy if it is continued – a worrying view. »

Pension contributions will be taxed above £2,000

The Budget announced that pension contributions sacrificed above an annual threshold of £2,000 will no longer be exempt from National Insurance – this will come into force from April 2029.

Grace shared her perspective: “This will have a substantial impact on pension providers who could see their contributions reduced, employees facing a significant overall tax burden and employers who will now find it even more difficult to help their employees invest for the future and retirement.”

Tax on electric vehicles

A new mileage tax on electric vehicles (EVs) is confirmed.

This includes a new mileage-based tax on electric and plug-in hybrid cars from April 2028, representing around half the fuel tax rate paid by drivers of gasoline cars.

Reeves explained: “This will be payable annually in addition to vehicle excise duty at 3p per mile for electric cars and 1.5p for plug-in hybrids.”

Fuel tax frozen

The fuel tax will be frozen at its current rate until September 2026, which Grace highlighted that this was “good news for the fuel-based industry and, most importantly, for commuters”.

Apprenticeship funding

Reeves announced funding to make training for apprentices under 25 completely free for small and medium-sized enterprises (SMEs).

Network card upgrade from 2026 to 2027

Some NIC limits and voluntary NIC rates for the self-employed will increase in line with the CPI to 3.8%.

This affects:

• Employers with independent contractors who make voluntary contributions
• Anyone using payroll or bookkeeping services to track mixed employment income
• Employees whose income is around the lower limits of earnings, as some will move into the contributory brackets

Student loan threshold freeze

The budget announced a freeze on repayments and interest rate thresholds for Plan 2 student loan repayments for three years, starting in 2027-28.

Changes to tax on dividends and savings

Tax rates on dividends and savings income will each increase by two percentage points over the next few years.

Payroll relevance:

• Directors whose salary and dividends are combined will have their net income reduced
• Organizations supporting administrator pay will need to prepare clear communication

Employment Rights Bill (ERB)

No updates to the Employment Rights Bill have been announced as it has already entered a “ping-pong” phase.

For the latest information on the Employment Rights Bill, check out these recent blogs:

Final Thoughts

Ahead of the budget, Prime Minister Keir Starmer said: “I can tell the House now that we will build a stronger economy, reduce NHS waiting lists and deliver a brighter future for our country.”

At this time, it is essential to prepare for the changes planned in the 2025 fall budget.

With significant updates to workplace legislation on the horizon, businesses must act quickly to ensure compliance and avoid potential penalties.

You don’t have to navigate these changes alone.

Trusted suppliers, like IRIS, are there to support businesses every step of the way.

If you take anything from this blog, let it be this: Start preparing today to ensure your business is ready for what lies ahead.

On October 30, 2024, the Labor government released its first budget since coming to power. And as expected, employers are expected to adopt many changes; In this blog we outline the key points that will impact businesses.

Any changes in legislation are confusing and often complicated, which can cause anxiety among human resources professionals and small business owners. In an effort to demystify the budget and ease some of your concerns, we’ve broken it down.

Some important changes we will look at include increases to the National Minimum Wage and National Insurance. While these changes seem scary, the blow will be softened for some employers with an increase in the employment allowance available to small businesses.

Any changes in legislation are confusing and often complicated, which can cause anxiety among human resources professionals and small business owners. In an effort to demystify the budget and ease some of your concerns, we’ve broken it down.

Keep reading for a concise overview of the 2024 fall budget.

National minimum wage and national insurance contributions to increase

Alongside the budgetary provisions, the The government has announced annual increases in the national minimum wage. This will come into force on April 1, 2025, so you still have time to prepare. The new minimum wage requirements are:

• 21 years and over – the minimum wage will increase from £11.44 to £12.21 per hour
• 18 to 20 – the minimum wage will increase from £8.60 to £10 an hour
• 16 to 17 years old and apprentices – the minimum wage will increase from £6.40 to £7.55 per hour

These increases bring the rates for under-21s and over-21s closer together and are a step towards the government’s plans to introduce a single rate for all adult workers.

Housing compensation (the amount of accommodation provided by an employer that can be taken into account when calculating the minimum wage) will also increase from £9.99 to £10.66 per day.

The government also announced that there would be a 1.2% increase in national insurance paid by employers. This means that it will increase from 13.8% to 15% on April 1, 2025.

The threshold at which employers start paying National Insurance on a worker’s earnings will also rise from £9,100 to £5,000 a year.

Employment allowance will increase

To soften the blow from rising national insurance contributions, the government announced that the employment allowance for small businesses will be increased from £5,000 to £10,500. The allowance allows employers to reduce their Social Security contributions up to the amount of the allowance, over the financial year.

The Chancellor explained that this would mean 865,000 employers would pay no national insurance next year (because the £10,500 allowance applied to their national insurance obligations would reduce their contributions to zero), while more than one million would pay the same amount or less. than they did before.

End of freezing of personal tax thresholds

The government has announced that there will be no extension of the current freeze on income tax and national insurance thresholds, and that the relevant thresholds will increase in line with inflation from financial year 2028-2029.

Retirements

Pensions will also be affected by the autumn budget. Basic and new state pensions will be increased by 4.1% in the 2025-26 financial year, in line with income growth.

Increase in carers’ allowance

The Chancellor also announced there would be an increase in the amount carers can earn while receiving the Government’s £81.90-a-week Carer’s Allowance.

This increase will mean that a carer will be able to work the equivalent of 16 hours per week at the National Living Wage and will therefore be able to earn more than £10,000 per year and still be eligible for the benefit. This is good news for employees with family responsibilities, but also for employers, because it gives caregivers more incentive to keep their jobs.

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