Autumn Budget 2025: What employers need to know

The Autumn Budget has introduced several measures that will shape payroll, benefits, and workforce planning over the coming years. Here is a practical summary of what is changing and how it could impact your business.

1. Salary sacrifice for pension contributions – major changes ahead

From April 2029, salary sacrifice arrangements for pensions will see a significant shift. Currently, both employees and employers save on National Insurance contributions (NICs) when pension contributions are made via salary sacrifice. However, under the new rules, only the first £2,000 of sacrificed contributions will remain exempt from NICs.

Income tax relief will continue, but contributions above £2,000 will attract both employee and employer NICs.

Who is affected?
Middle earners and employers will feel the biggest impact.

For example, an employee contributing 5% on all earnings:

• earning £50,000 could pay an extra £40 NICs per year, while employers pay £75 more.
• earning £100,000, could pay an extra £60 NICs per year, while employers pay £450 more.

2. NICs – stability until 2031

There is no immediate change to NIC thresholds or rates until April 2031:

• Primary threshold: £12,570
• Secondary threshold: £5,000
• Upper earnings limit: £50,270

• Employees: 8% (up to £50,270), 2% above that
• Employers: 15%
• Employment allowance: £10,500 per year

3.Student loan repayment thresholds – freeze confirmed

It was confirmed that the Plan 2 student loan repayment threshold will rise to £29,385 in April 2026 and then remain frozen until April 2030. This affects graduates who started courses between September 2012 and July 2023.

• Repayments remain at 9% of earnings above the threshold.
• Freezing the threshold means more graduates will start repaying sooner as wages rise, increasing repayment amounts over time.

4. National Minimum & Living Wage – plan for increases

From April 2026, wage rates rise significantly:

• Under 18 apprentices: £8.00 per hour (+6%)
• Ages 18–20: £10.85 per hour (+8.5%)
• 21 and over: £12.71 per hour (+4%)

Employers should review budgets and payroll systems to accommodate these changes.

5. Benefits in kind – new rules

• Working from home: From April 2026, employees can no longer claim tax deductions directly from HMRC for unreimbursed home-working expenses. Employers can still reimburse costs tax-free.
• Eye tests, home-working equipment, flu vaccinations: Exemptions extended to reimbursements from April 2026.

6. Payrolling benefits & interest rates

• From April 2027, most benefits will be payrolled (excluding accommodation and loans initially)
• Class 1A NICs will apply to payrolled benefits.

7. EMI limits – increase announced

It was confirmed an increase to Enterprise Management Incentive (EMI) share option limits, designed to support growing businesses:

• company options will be increased from £3 million to £6 million
• gross assets will be increased from £30 million to £120 million
• the number of employees will be increased from 250 employees to 500 employees
• The overall company and employee limits remain unchanged at £3 million and £250,000, respectively.

For eligible companies, the following change will apply to EMI contracts granted on or after 6 April 2026 and can also apply retrospectively to existing EMI contracts which have not already expired or been exercised. The limit on the exercise period will be increased from 10 years to 15 years. Existing contracts can be amended without losing the tax advantages the schemes offer, provided it is in line with the legislation.

This change aims to make EMI schemes more attractive for retaining and rewarding talent in high-growth sectors. 

What employers should do now

• Review salary sacrifice schemes ahead of 2029
• Budget for wage increases in 2026
• Update benefit policies and payroll systems for payrolling changes
• Reassess profit extraction strategies for tax efficiency.

Need help?

These changes may feel a long way off, but reviewing your payroll and reward strategies now will help you stay ahead. Here is how we can support you:

• Budgeting for wage increases:
  For example, if you employ 10 staff aged 21+ working 37.5 hours per week, the April 2026 increase from £12.21 per hour to £12.71 per hour will add around £9,750 per year to your payroll. We can help you model these costs and identify savings elsewhere.
• Remuneration planning and tax efficient profit extraction.
  We’ll work with you to:
• Review bonus structures and consider performance-linked incentives
• Explore non-cash benefits such as additional holiday or wellbeing rewards
• Assess the impact of frozen student loan thresholds on net pay and employee engagement
• Implement share schemes to retain talent without inflating payroll costs
• Consider the impact of corporation tax rates on the efficiency of salaries and dividends.

Contact your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk for tailored support that fits your business.

Dannielle Chapman and Tessa Brown