UK Autumn Budget 2025: What Employers & Businesses Need to Know

On 26th November 2025, Chancellor Rachel Reeves delivered the UK Autumn Budget, a fiscal statement that will have long-term implications for employers, hiring plans and workforce costs.

While the Budget avoided headline tax rate increases, a combination of wage rises, threshold freezes and structural tax changes is expected to raise over £26 billion, much of which will be felt quietly by UK businesses over the coming years.

Against a backdrop of rising operating costs, weak productivity and ongoing skills shortages, understanding how the Autumn Budget affects your business is essential for effective workforce planning and futureproofing.

Autumn Budget 2025: Key Changes at a Glance (For Businesses)

• National Living Wage rising to £12.71/hour (April 2026)
• Income tax & NIC threshold freezes extended to April 2031
• Employer NIC costs remain elevated due to fiscal drag
• Pension salary sacrifice NIC changes from April 2029
• Fully funded apprenticeships for SMEs (for under 25s) from April 2026
• Dividend tax increases from April 2026
• Permanent business rates reduction for retail, hospitality & leisure
• Increased penalties for late corporation tax filings

From April 2026, the National Living Wage for workers aged 21+ will increase to £12.71 per hour.

For employers, this doesn’t just affect entry-level roles. It often leads to:

• Salary compression between junior and mid-level roles
• Pressure to uplift wages across pay bands
• Increased expectations around cost-of-living increases

Businesses in sectors such as retail, hospitality, logistics, engineering and support services are likely to feel the impact most acutely.

The extension of income tax and National Insurance threshold freezes until 2031 means:

• More employees move into higher tax bands
• Employer NIC liabilities increase over time
• Salary increases deliver less value to employees

The OBR estimates that one in four adults will be higher-rate taxpayers by 2031, increasing pressure on employers to offer non-salary benefits to retain talent.

From April 2029, employers will pay additional NICs on salary sacrifice pension contributions exceeding £2,000 per year.

Although this is technically an employer cost, it may lead some businesses to:

• Reduce pension contributions
• Reassess benefits packages
• Offset costs elsewhere

This could impact employee engagement and retention, particularly in competitive sectors.

One of the most positive announcements for employers is the move to fully funded apprenticeships for SMEs from April 2026.

This removes the current 5% employer contribution and could:

• Encourage hiring of early-career talent
• Reduce reliance on expensive experienced hires
• Support long-term skills development

We may see a shift towards training and succession planning rather than paying a premium for experience.

The Autumn Budget reinforces a key reality for employers:

Hiring mistakes are becoming more expensive.

With higher wages, higher taxes and tighter margins, businesses will need to:

• Hire more strategically
• Focus on long-term value, not just speed
• Improve retention alongside recruitment

Partnering with a sector-specialist recruitment agency can help ensure the right hires are made first time, reducing costly turnover and mis-hires.

From January 2026, transfer pricing rules will be simplified for multinational organisations. However, this comes alongside new reporting obligations, including the introduction of International Controlled Transactions Schedules (ICTS) from 2027 for related-party transactions.

For affected businesses, this means:

• Increased reporting and compliance requirements
• Greater scrutiny of cross-border transactions
• A need for closer alignment between finance, tax and leadership teams

The Budget also announced a relaxation of restrictions on the use of surplus Advanced Corporation Tax (Shadow ACT) balances from April 2026.

This change may:

• Improve cashflow flexibility for some businesses
• Allow more efficient use of historic tax balances
• Support long-term financial planning

Professional advice will be key to understanding how, or if it applies to your organisation.

Whether you’re planning growth, maintaining headcount or restructuring, the Autumn Budget 2025 makes workforce planning a board-level issue.

Understanding the labour market, and securing the right talent will be critical to navigating the years ahead.

For Growth-Focused Businesses: Plan for higher labour and tax costs, but leverage new capital allowances and investment scheme boosts. Now more than ever, ensuring you hire the right candidates for the roles you are advertising is vital. This is where partnering with a Recruitment Agency that specialises in your business sector or recruitment functions could massively benefit your hiring strategy.

For SMEs: Be aware of increased costs despite some reliefs; focus on controlling what you can and don’t wait for future relief.

For Multinationals: Prepare for new reporting obligations under the simplified transfer pricing regime.

For the Self-Employed: A longer-term change (from 2029) will require paying more Self Assessment via PAYE during the year.