How will Chancellor Rachel Reeves’ Autumn Budget impact HR and payroll? This TCP blog rounds up some key points.
Minimum wage rates from April 2026 – The Government has accepted the Low Pay Commission’s recommendations on minimum wage rates. From April, the National Living Wage (NLW) for over 21-year-olds will increase to £12.71 an hour and the National Minimum Wage (NMW) will rise to £10.85 an hour for those aged 18 to 20. For those aged 16 to 17, their NMW will go up to £8 an hour.
Freezing tax thresholds – The Budget confirmed a continued freeze on income tax and National Insurance thresholds for another three years from 2028.
National Insurance uprating from 2026 to 2027: Some NIC limits and voluntary NIC rates for the self-employed will rise in line with CPI at 3.8%. This affects those using payroll or bookkeeping services to track mixed employment income, employers with self-employed contractors who make voluntary contributions and employees with income around the lower earnings limits, as some will move into the contributory bands.
State pension rise – The chancellor confirmed that the state pension will rise in line with average wages. This means the new flat rate state pension for those who have reached state pension age after April 2016 will rise from £230.25 to £241.30 and the old basic state pension for those who reached state pension age before April 2016 will rise from £176.45 to £184.90.
Changes to dividend and savings tax – Dividend tax rates and savings income tax rates will each rise by two percentage points across the next few years. The implications are that directors with combined salary and dividends will see reduced net income and organisations supporting directors’ payroll will need to prepare detailed communication.
Salary sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from National Insurance. This will come into force from April 2029.
Electric vehicle tax – A new mileage tax on electric vehicles (EVs) was confirmed. This includes a new mileage-based charge on electric and plug-in hybrid cars from April 2028 at around half the fuel duty rate paid by drivers of petrol cars.
Fuel duty frozen – This will remain at its current rate until September 2026.
Apprenticeship funding – Training for under-25 apprenticeships will be completely free for small and medium-sized enterprises (SMEs).
Student loans threshold freeze – The Budget announced a freeze to the repayments and interest rate thresholds for Plan 2 student loan repayments for three years, starting from 2027-28.
If you would like any help or advice around what the budget means for you and your business, please do get in touch, we would be happy to help.