The Autumn Budget for 2025/26 introduces several employment and payroll changes that will directly affect UK businesses. From National Insurance and wage increases to company car benefits and new payroll reporting rules, these measures will influence how you budget, recruit and manage staff in the years ahead.
Here is a clear breakdown of the updates most relevant to employers.
Employer National Insurance Contributions and Allowance
The employer NICs rate remains at 15 per cent for 2025/26.
The Secondary Threshold, the point at which employers start paying NICs for each employee, stays fixed at £5,000 per year until April 2031.
Employment Allowance remains available. Eligible businesses can reduce their NICs bill by up to £10,500 per year.
National Living and Minimum Wage Increases from April 2026
Employers will need to prepare for increased wage costs from 1 April 2026, when the following new rates take effect:
| Category | Hourly Rate |
|---|---|
| National Living Wage (21 and over) | £12.71 |
| Age 18 to 20 | £10.85 |
| Age 16 to 17 | £8.00 |
| Apprentices | £8.00 |
Make sure your payroll systems are updated and your budgets reflect these changes in advance.
U-turn on Day One Unfair Dismissal Protection
The government has confirmed that plans to introduce day one rights to claim unfair dismissal have been dropped. Instead, protection from unfair dismissal will now apply after six months of continuous employment.
This change follows pressure from business groups and concerns that immediate protections could discourage hiring. It allows employers to retain more flexibility during the initial months of employment without being immediately exposed to legal dismissal claims.
Other rights that were originally planned to take effect from the first day of employment, including statutory sick pay and paternity leave, are still expected to come into force in April 2026.
NICs Relief for Hiring Veterans Extended
The employer NICs relief for hiring military veterans in their first civilian role has been extended to April 2028. This means you will not pay employer NICs on the first £50,270 of earnings for qualifying veterans during their first year of employment.
Company Car and Van Benefit Changes
Employers providing company vehicles should note these updates for 2026/27:
- The benefit-in-kind rate for zero-emission cars rises from 3% to 4%.
- Other low-emission cars (under 75g/km) will see a 1% increase in their tax charge.
- The maximum benefit charge remains at 37%
- A temporary easement for plug-in hybrid vehicles will apply from 1 January 2025 to 5 April 2028, helping employers manage increased tax bills due to emissions rule changes.
- The Car Fuel Benefit Charge, Van Benefit Charge and Van Fuel Benefit Charges will all increase from April 2026.
Mandatory Payroll Reporting for Benefits in Kind
As part of the changes introduced in the Autumn Budget 2025, from April 2027 all benefits in kind must be reported and taxed through payroll software. This will apply to both Income Tax and Class 1A NICs.
Businesses should start preparing by reviewing their systems, processes and software to ensure compliance ahead of the phased rollout.
New Liability for Umbrella Company Non-Compliance
From 6 April 2026, if you engage workers through an umbrella company, your business could be held jointly liable for any unpaid PAYE and NICs.
Key points:
- Agencies will be first in line for responsibility.
- If there is no agency, the end client (you) will be responsible.
- This change aims to protect workers from tax issues caused by non-compliant umbrella providers.
Employers should review supply chains and recruitment arrangements to ensure transparency and compliance.
Salary Sacrifice for Pensions | NIC Relief Capped
From April 2029, only the first £2,000 of pension contributions made via salary sacrifice will be exempt from National Insurance.
Any employee contributions made above this limit through salary sacrifice will be subject to both employer and employee NICs. Employer contributions will remain exempt.
Payroll reporting of all sacrificed amounts will be required.
New Tax Relief for Reimbursed Employee Benefits
From April 2026, employers can claim tax exemptions when reimbursing staff for:
- Eye tests
- Flu vaccines
- Homeworking equipment
This aligns the treatment of reimbursed costs with directly provided benefits, making it easier for employers to support staff wellbeing and remote work.
End of Tax Relief for Unreimbursed Homeworking Costs
From 6 April 2026, employees who are required to work from home will no longer be able to claim tax relief on unreimbursed household costs, such as utility bills and business telephone calls.
This only applies where the employer does not reimburse the costs. Employers can still reimburse eligible homeworking expenses, without deducting Income Tax or NICs.
What Should Employers Do Now?
These changes introduce new costs, shifting responsibilities and greater complexity in how employers manage pay, benefits and compliance.
Now is the time to review your employment arrangements and make sure your business is ready for the changes the Autumn Budget 2025 brings.
If you’re unsure where to start, chat with us.