On 26 November, the Chancellor of the Exchequer delivered the 2025 Autumn Budget. For your convenience, we have broken down the announcements specific to payroll, PAYE, workplace pensions, and employee benefits.
Please take five minutes to read this summary so you know what to expect this coming tax year and beyond.
Income Tax and NICs
- Personal tax allowances and rates are frozen for three more years, until April 2031.
- Forecasts accompanying the Budget show expected revenue of over £12 billion from this by 2030/31.
- Wages are expected to rise by around 15% by 2030, which may push more people into higher tax bands.
- The Secondary Threshold (£417 per month) and Upper Earnings Limit (£4,189 per month) are both frozen until April 2031.
- This means employers and employees are likely to pay NICs on a larger proportion of earnings as wages increase.
- As announced in 2024, the Lower Earnings Limit rises by 3.8%, from £542 to £559 per month.
National Living Wage and Minimum Wage
- From 1 April 2026, the National Living Wage (age 21+) rises from £12.21 to £12.71 per hour.
- For ages 18 to 20, the rate rises from £10.00 to £10.85 per hour.
- For under-18s and eligible apprentices, the rate rises from £7.55 to £8.00 per hour.
- The Real Living Wage (£13.45) and London Living Wage (£14.80) are unchanged, with the next review due in October 2026.
Pensions
- No immediate changes were announced to pension tax relief, contribution limits, or contribution structures.
- From April 2029, full salary sacrifice tax relief for pension contributions will be restricted to £2,000 of employee contribution.
- Employee contributions above £2,000 will be subject to Employer and Employee NICs.
- Employer pension contributions remain free of NICs.
- Most employees making typical 5% contributions are unlikely to be affected.
Employee Benefits
The basis for taxing company cars and private fuel use remains structured to encourage electric vehicle use, with hybrid rates moving closer to internal combustion engine rates over time.
For 2026/27, the following taxable benefit figures increase by 3.8% in line with inflation:
- The benefit of free business fuel for private journeys.
- The taxable amount for availability of a van for more than incidental private use.
- The taxable amount for private use of fuel in a company van.
From April 2026, employees can no longer claim a tax deduction for home-working expenses that are not reimbursed by their employer.
Employers may still reimburse eligible costs without deducting income tax or NICs.
Student Loans
- The repayment threshold for Plan 2 student loans is frozen at £29,385 per year for three years from April 2027.
- This is likely to increase repayments over time as wages rise.
Help, Questions, or Forecasts
If you would like help with anything in this summary, have questions about how specific policies may affect your business, or would benefit from forecasts for next year, please get in touch at support@payrollunlimited.co.uk.
