Fall 2025 Budget: key points for HR and payroll

The Autumn Budget 2025 got off to a chaotic start when the Office for Budget Responsibility (OBR) published some of its estimates early.

Henry Zeffman, Chief Political Correspondent at the BBC, commented: “The budget is in place thanks to a mistake by the Office of Budget Responsibility. This is truly extraordinary. An hour ago, this would have been unimaginable. It’s hard to find the right adjective to do it justice.”

However, Chancellor Rachel Reeves then delivered the highly anticipated Budget, unveiling a series of measures designed to have a significant impact on businesses across the UK.

Reeves started his speech by saying: “These budget measures are the right choice to deliver a fairer, stronger and safer Britain.”

Below, we have summarized some of the key points from the Autumn 2025 Budget, detailing the potential implications for HR and payroll.

Minimum wage levels from April 2026

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

• From April 2026, the National Living Wage (NLW) for over-21s will increase to £12.71 per hour
• Meanwhile, the National Minimum Wage (NMW), for those aged 18 to 20 years, will be increased to £10.85 per hour
• For those aged 16 to 17, their NMW will increase to £8 per hour

Our Director of HR Consulting, Dan Grace, commented: “Further increases in NLW and NMW mean costs for UK businesses continue to rise. This could lead to further economic impact and possible changes to the cost of living as prices rise to account for rising wages.”

Freeze tax thresholds

The Budget confirms a freeze on income tax and National Insurance thresholds for a further three years starting in 2028, continuing the freeze implemented by the previous Government.

Reeves stated that he was ‘asking everyone to contribute’ as the threshold will remain frozen at current levels until 2031.

Dearbail Jordan, Senior Business and Economics Reporter at the BBC, commented: “The tax threshold freeze that Reeves just announced is not a surprise. What is surprising is that it will remain in place for three years, rather than the expected two. That means that by the time we reach 2031, the tax threshold will have been frozen for almost a decade.”

Increase in state pension

The Chancellor confirmed that state pension funds in April 2026 will increase in line with the increase in average wages.

It means:

• The new flat rate state pension for those who have reached state pension age after April 2016 it will rise from £230.25 to £241.30
• The old basic state pension for those who reached state pension age before April 2016 it will rise from £176.45 to £184.90

Grace commented: “Some people worry that the triple lock system will hurt the budget and bankrupt the UK if it remains – a concerning view.”

Taxable pension contributions above £2,000

The Budget announced that sacrificed pension contributions on salaries above the £2,000 annual threshold will no longer be excluded from National Insurance – this will come into effect from April 2029.

Grace shares her views: “This will have a major impact on pension providers who may see pension contributions fall, workers who face a large overall tax burden, and employers who will now have to fight harder to help their workers invest for the future and retirement.”

Electric vehicle tax

A new mileage tax for electric vehicles (EVs) has been confirmed.

This includes new rates based on mileage on electric cars and plug-in hybrids from April 2028, which are about half the fuel rates paid by petrol car drivers.

Reeves explains: “This will be paid annually along with vehicle excise duty of 3p per mile for electric cars and 1.5p for plug-in hybrid cars.”

Fuel duty frozen

Fuel duties will be frozen at current rates until September 2026 Grace highlighted it as ‘good news for fuel-based industries and, most importantly, commuters’.

Internship funding

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

NIC increase from 2026 to 2027

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

This affects:

• Entrepreneurs with self-employed contractors who make voluntary contributions
• Anyone who uses payroll or bookkeeping services to track mixed employment income
• Employees with earnings around the lower income limit, as some will move into the contribution bracket

Student loan threshold freeze

The budget announces a payment freeze and interest rate thresholds for Plan 2 student loan payments for three years, starting in 2027-28.

Changes to dividend and savings taxes

The dividend tax rate and savings income tax rate will each increase by two percentage points in the next few years.

Payroll relevance:

• Directors with a combination of salary and dividends will experience a decrease in net profit
• Organizations that support director remuneration need to provide clear communication

Employment Rights Bill (ERB)

No updates to the Employment Rights Bill have been announced as it has entered the ‘ping pong’ phase.

For the latest information on the Employment Rights Bill, see the following recent blogs:

Closing thoughts

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

Now more than ever, preparing for the changes outlined in the Fall 2025 Budget is critical.

With significant updates to workplace laws, businesses must act quickly to ensure compliance and avoid potential penalties.

You don’t have to navigate these changes alone.

Trusted providers, like IRIS, are here to support businesses every step of the way.

If you want to benefit from this blog, do this: start preparing today to ensure your business is ready for the future.