On 26 November 2025, Chancellor Rachel Reeves delivered the UK’s Autumn Budget, a package with important implications for income tax, pensions, payroll and pay rates. Many of the changes will affect employers, HR teams, payroll providers, and global mobility programmes.
The Budget extends the freeze on personal income tax thresholds, including the personal allowance and higher-rate bands, until April 2031. This means employees may face higher effective tax rates as wages rise, even though nominal tax rates remain the same.
Salary sacrifice pension schemes will see a cap on tax/National Insurance advantages for contributions above £2,000 per year from April 2029. Contributions above the cap will attract standard employee and employer NI.
To support low-paid workers, the national living wage and minimum wage will rise from April 2026. Adults aged 21+ will see a rate of £12.71 per hour, with lower rates for younger workers and apprentices.
Combined, frozen tax thresholds, pension caps and minimum wage increases create pressures on payroll, compensation and global mobility programmes.
The Budget introduces several changes that will affect employees’ take-home pay and benefit attractiveness. Employers should take a proactive approach to planning, communication and compensation strategy.
At activpayroll, we support organisations in navigating changes to UK payroll, pensions, tax thresholds and global mobility programmes. Following the Autumn Budget 2025 announcement, our team can help you assess the impact of frozen tax thresholds, salary‑sacrifice pension caps and minimum wage increases on your workforce and total reward strategies.
Please complete our Contact Us form, or reach out to Steph Smith, our Head of Global Mobility, to discuss how we can support your organisation in responding to the UK Budget 2025 changes.