What the Autumn Budget means for employers and their employees

The most anticipated political moment in 2025 might be the Autumn Budget, and after many speculations Chancellor Rachel Reeves announced the changes coming into effect as soon as April 2026. 

As our labour market economist Dr. Julius Probst notes, the budget signals caution rather than crisis – with a more stable economic outlook in 2026 – and gives opportunities to get ahead of the changes instead of being caught off-guard.

Here’s what the Autumn Budget means for employers and workers.

Tax changes for UK workers and businesses 

Chancellor Rachel Reeves delivered her much anticipated Budget announcement on 26^th of November.  

Despite speculation, The Chancellor didn’t increase Income tax or National Insurance contributions this time. Instead, she announced they will freeze personal tax thresholds until 2031 (extended from April 2028).  

This means that people getting paid above £50,270 will pay the higher 40% tax rate. The thresholds were first changed in 2021 by Rishi Sunak – with critics naming it “stealth tax”. 

The minimum wage and National Insurance contributions

While there wasn’t an increase to the National Income tax or the National Insurance contributions, the Chancellor did increase the National Minimum Wage to £12.71 an hour which will come into effect next April.  

Meanwhile, apprenticeship rate is going to be £8 an hour for those eligible and under 19 and those aged over 19 during the first year of apprenticeship. 

Businesses have been affected by the increase in Minimum Wage and NI contributions, especially in retail and hospitality sectors, but Rachel Reeves announced that the government will introduce “permanently lower tax rates” for more than 750,000 retail, hospitality and leisure properties. 

Pension and ISA savings

As a twist, the Chancellor has also announced changes to pensions; from April 2029, a £2,000-a-year cap will be introduced on how much can be put into pensions through salary sacrifice (with NI applying to additional savings).  

This is going to be a key area employers will need to start thinking about as it changes employee benefit offerings significantly. Reeves’ move is likely to encourage investment in markets – as she also changed allowances for ISAs. 

The Chancellor said that the cash ISA annual limit will be cut from £20,000 to £12,000 from April 2027 to encourage more investment into stocks. However, those over 65 will retain the full cash allowance of £20,000. 

The “mansion tax” 

Finally, a council tax surcharge will be introduced from April 2028 for homes worth more than 2 million pounds. The price bands will start at £2,500 for a property valued in the £2m to £2.5m band, to £7,500 for a property valued in the highest band of £5m or more. 

Expected growth for the UK 

The Office for Budget Responsibility reviewed its growth forecast for the next 4 years – with 2026, 2027, 2028, 2029 projections down from what was forecast before. 

The 2025 growth forecast from 1% to 1.5%. However, the GDP is expected to now grow 1.4% in 2026, instead of 1.9%. 

For 2027, GDP is estimated to grow by 1.6% against March’s estimate of 1.8%, the following year the GDP is forecast to rise by 1.5% – instead of 1.7%. 

And in 2029, the economy will expand by 1.5%, not 1.8% as previously thought. 

Labour’s latest Budget lands with a mixed bag, but there are some reassuring signals for workers and employers. The OBR’s early numbers show the government has a bit more fiscal breathing room than expected, thanks to higher nominal earnings boosting tax receipts – even if growth itself isn’t racing ahead. 

For businesses and jobseekers, that means the broader economic backdrop is more stable than last year. 

Of course, some measures like freezing tax thresholds for longer and the salary sacrifice changes in pension schemes will create pressure, especially for sectors with large workforces or many higher earners. The good news is that the pension changes don’t hit until 2029, giving employers time to plan rather than panic. 

And while another minimum-wage rise will feel tough for industries already struggling with costs, it’s also a reminder of the continued push for fair pay; welcomed by workers and good for talent attraction. Short-term relief on energy bills and fuel also offers households a bit of breathing room. 

Overall, this Budget signals caution rather than crisis, focusing employers more on deliberate workforce planning. But also, it gives opportunities to get ahead of the changes instead of being caught off-guard.

Dr. Julius Probst, Labour Economist