What the Autumn Budget means for HR & payroll

Rachel Reeves, the UK’s first female Chancellor, announced the Autumn Budget with the mantra to ‘invest, invest, invest’.

But what does that really mean for HR and payroll teams across the UK? We’ve broken down the most crucial changes and how they might impact your business operations.

The NMW bump

From April 2025 National Living Wage (NLW) will jump 6.7% to ￡12.21 for those over 21. Notably, the lower National Minimum Wage (NMW) rate for 18–20-year-olds will be phased out, meaning all workers aged 18 and up will eventually be entitled to the same rate.

That’s great news for workers, but businesses face higher payroll costs, especially those dependent on hourly roles. Employers may have to rethink budget allocations or tweak salary sacrifice schemes to keep them attractive.

Essentially, budgeting for 2025 just got a bit trickier. Consider planning now to manage this wage increase smartly, so it aligns with your financial strategies.

New costs and unexpected changes to NICs

National Insurance Contribution (NIC) changes are shaking things up. From April 2025, employers will see the NIC rate increase from 13.8% to 15%, meaning an extra 1.2% on applicable earnings. On top of that, the range for these contributions is expanding, as the secondary threshold will drop from ￡9,100 to ￡5,000. This means an additional ￡4,100 of earnings will be subject to the new rate, costing businesses an extra ￡615 annually per employee whose earnings exceed the current threshold.

Currently, businesses with an NIC bill of ￡100,000 or less in the previous tax year can benefit from the Employment Allowance, which allows them to take ￡5,000 off their employer NIC bill. However, as announced in the Budget, this allowance will increase from ￡5,000 to ￡10,500. It’s also since come to light that this expanded allowance will not be limited to small businesses; it will be available to all businesses, as the government plans to remove the ￡100,000 limit.

While the increase in the allowance might cushion the impact for very small businesses, larger employers will still feel the pinch, as the higher allowance may not significantly offset the extra cost for them. So, now is the time for businesses to assess how these changes will affect them in the coming year and start planning accordingly.?

Income tax changes on the horizon

From 2028 personal income tax thresholds will rise with inflation, meaning fewer people will feel that ‘tax creep’. For higher earners though, expect adjusted pension tax relief, which could influence retirement planning down the road. These tax shifts might help employees feel a bit more stable, though they are a way off.

HMRC compliance crackdown

HMRC’s budget boost signals more hands-on-deck for enforcing compliance. Inspections into National Minimum Wage (NMW), tax reporting, and other payroll-related compliance could ramp up, meaning businesses need to be extra vigilant.

Now’s the time to double-check your NMW compliance, payroll accuracy, and reporting procedures. Preparing for more audits could save you a lot of trouble (and fines!) down the line.

Fuel duty freeze continues

The freeze on fuel duty will stay in place for another year, alongside the last government’s 5p cut. This will provide some consistency in transport costs, especially useful for businesses with fleets or delivery services.

A boost for high streets

If you’re in the retail, hospitality, or leisure sector, there’s a timely gift in the form of a 40% rate relief on business rates. This relief, capped at ￡110,000, runs until 2026-27, offering breathing room for sectors where profit margins can be tight.

However, keep in mind this relief is temporary. For businesses, it’s a chance to reinvest these savings into growth, recruitment, or operational improvements while the rate is in place. Now’s the time to plan ahead to make the most of this advantage.

Uplifted and uprated

Carers will see an income bump as their allowance now aligns with 16 hours at NLW. They can earn more without losing eligibility, which is beneficial for workers juggling caregiving responsibilities.

In the same vein, state pensions and benefits will follow the ‘triple lock’, giving retirees a 4.1% increase. For employers, this policy may bring stability to employees planning for retirement, knowing the state pension is secured (… for now).

This year’s Autumn Budget has brought some anticipated changes, along with a few surprises.

While small businesses get some helpful reliefs, bigger employers need to brace for increased NIC costs and compliance checks.

Now is the time to get ahead by evaluating your budget, compliance and offerings. We’ll keep an eye on these updates and dig into further details as more guidance rolls out, so keep your eyes peeled and watch this space! You can read the Autumn budget in its entirety right here.