What impact will the Autumn Budget 2025 have on your business? A guide to post budget strategy for HR & Payroll

The Chancellor has confirmed measures directly affecting employment costs around pension salary sacrifice, tax threshold freezes and National Minimum Wage increases, along with a host of other measures set to potentially indirectly affect employers, starting from April 2026. The National Living Wage rises 50p to £12.71 per hour for over 21s, with workers aged 18-20 seeing an 85p rise to £10.85, and under-18s and apprentices getting 45p more to £8 an hour – an increase that will influence pay structures across many organisations.

Income tax thresholds will remain frozen until 2031, meaning almost 1 million employees will move into higher tax brackets through normal pay progression. Understanding how this impacts your specific workforce will help with planning.

Practical next steps for HR and payroll teams

• Calculate the specific impact on your organisation using the confirmed rates. This provides the foundation for budget planning and helps inform strategic decisions about workforce planning.
• Review where your employees currently sit within tax bands. Many organisations find clusters of employees near threshold points, particularly around £50,000 and £100,000. This information helps when planning salary reviews and considering the total reward impact for employees.
• Prepare clear employee communications that explain what changes mean for take-home pay. Focus on facts and practical information rather than complex tax explanations. 

Changes to pension arrangements have been confirmed, with contributions above £2,000 annually no longer exempt from National Insurance Contributions from April 2029.

This change is predicted by the OBR to impact how employees engage with pension salary sacrifice, potentially switching to “relief at source” (RAS) schemes, reducing salary sacrifice pension contributions, in turn impacting the NIC savings employers currently receive.

However, the tax-saving opportunity salary sacrifice presents employers is not all lost, as the Bike Scheme remains unaffected despite earlier rumours to the contrary, and schemes such as Holiday Trading and the EV Car Scheme continue to remain attractive. This remains pertinent with income tax threshold freezes also announced, meaning more employees face potential movement into higher tax brackets, making salary sacrifice schemes more attractive to many, while even lower-rate tax payers may also seek tax-efficient benefits to replace their previous tax-advantaged pension contributions.

It’s worth noting these changes won’t come into play until April 2029, giving employers plenty of time to adjust, and employee behaviour and attitudes towards salary sacrifice schemes to become more apparent, helping employers make much more informed decisions around benefits packages.

Supporting your workforce through pension changes

• Review your current pension arrangements to understand how the announced changes affect them. 
• Connect with your pension provider to understand their interpretation of the changes and any support they can offer. Many providers are developing resources to help employers and employees navigate the new landscape.
• Consider what additional support might help employees, particularly those closer to retirement who may need to reconsider their plans. This could include access to guidance sessions, updated pension modelling tools, or signposting to appropriate resources.

Example pension strategy response plan:

• Immediate: Review how the announced pension salary sacrifice restrictions affect your current schemes
• By January 2026: Update all pension communications to reflect the new tax structure
• Q1 2026: Launch financial education sessions on the new tax implications
• Ongoing: Monitor transitional arrangements and adjust schemes accordingly

Changes to savings allowances: What it means for your workforce

The £20,000 ISA allowance will remain, however £8,000 of this will now be designated exclusively for investment purposes for under 65s. While ISAs are personal savings vehicles, they form an important part of many employees' financial planning and will likely affect middle-income earners who rely on ISAs as their primary savings vehicle.

Employees under 65 who previously used their full £20,000 ISA allowance for cash savings (for house deposits, emergency funds, or risk-averse saving) would now be forced to either invest £8,000 in stocks and shares or lose that portion of their tax-free allowance. This particularly affects lower-risk savers and those saving for short-term goals who can't afford market volatility.

These changes may affect how employees approach saving and require adjustments to financial wellbeing programmes that many organisations offer.

Refining your financial wellbeing strategy

• Review your current financial wellbeing offerings to ensure they remain relevant. Employees may need different types of support as the savings and tax landscape changes.
• Consider providing guidance on alternative savings strategies given the new limits. This could include educational resources that help employees understand their options in straightforward terms, either through workshops, written guides, or access to financial guidance services.
• Workplace savings schemes could provide an alternative for employees looking for convenient ways to save. While these don't offer the same tax advantages as ISAs, they can help maintain savings momentum through payroll deduction.

Understanding the impact of the budget on your current schemes

The budget has confirmed that Pension salary sacrifice schemes will face direct changes from April 2029. Indirectly, schemes such as the Electric Car Scheme are likely to be affected by a new excise duty for electric cars at 3p per mile for electric cars and 1.5p for plug-in hybrids.

Overall, the impact of the budget on employee benefits will be both direct and indirect. Understanding the budget’s impact on business strategy can prove essential for HR leaders in their plans for long-term resilience

Based on current engagement patterns across medium-large organisations, the schemes likely to be most affected include:

• Cycle to Work (typically 7% employee engagement) - allowing employees to save up to 42% on bikes and accessories
• Holiday Trading (often highest engagement at 20%) - giving employees flexibility to buy or sell annual leave days
• Electric Vehicle schemes (growing to 4% engagement) - supporting both environmental goals and employee savings
• Pension salary sacrifice - where even small increases in engagement can generate significant NI savings

Each scheme will need reviewing against the new regulations and likely changing employee behaviours in the coming years to understand continued viability and any required adjustments. While we believe these changes will change usage of the scheme, further detail will reveal the true effect in the coming weeks and months.

Adapting your benefits approach

While pension salary sacrifice will be directly affected, freezing of tax thresholds will mean salary sacrifice schemes can and will still deliver great value for employees. The OBR estimates that 780,000 more people will be brought into paying income tax in 2029-30, with many employees moving between brackets, to whom salary sacrifice will be especially of interest to help maintain tax efficiency.

For a typical organisation with 500-1,000 employees, a well-engaged holiday trading or cycle to work salary sacrifice scheme alone can save tens of thousands in employer NICs annually. The key is ensuring schemes remain compliant, particularly for minimum wage workers, while maintaining clear communication about their value.

The shift in tax efficiency also means reconsidering your overall benefits mix. While some tax advantages may reduce, other valuable benefits remain unaffected and may become more important:

Financial wellbeing support becomes even more critical:

• Discount schemes for everyday expenses
• Financial education and guidance services
• Debt management support and money management tools
• Workplace savings schemes

Health and wellbeing benefits maintain their full value:

• Employee assistance programmes
• Health cash plans and private medical insurance
• Wellbeing apps and resources
• Gym memberships and wellness programmes

Recognition and reward programmes help maintain morale:

• Peer-to-peer recognition systems
• Non-monetary rewards aligned with company values
• Instant recognition tools

The key to maintaining engagement is creating a unified benefits experience. When benefits are fragmented across multiple providers and platforms, utilisation drops significantly. A single platform where employees can access their payslip, book leave, and explore benefits in one session typically sees much higher engagement rates.

Benefits strategy adjustments to consider:

• Review which of your current schemes are affected
• Calculate the cost impact of any lost National Insurance advantages
• Identify which alternative benefits could fill gaps
• Consider consolidating providers to reduce administrative burden
• Communicate changes to employees clearly and early

The impact of these changes will likely be gradual as they'll take effect over the coming years, with policies landing at the start of various upcoming tax years. However, agile employers can almost certainly get ahead of upcoming changes to the benefit of the business and their employees

December 2025: Analysis and planning

• Calculate specific cost impacts for your organisation
• Identify which employees are most affected by changes
• Brief senior leadership on financial implications
• Begin developing communication strategie

January 2026: Decision making

• Finalise any changes to benefits offerings
• Launch employee support programmes
• Begin consultation processes where required
• Submit any required scheme changes before deadlines

February-March 2026: Implementation

• Complete system and payroll updates
• Deliver employee communications and education
• Ensure support resources are in place
• Monitor early employee feedback

Ongoing through 2026

• Track implementation of phased changes
• Adjust strategies based on employee feedback
• Prepare for April 2027 pension changes

The budget changes require both immediate actions and longer-term strategic thinking. Successful navigation involves balancing cost management with employee support to help mitigate the potential impact of the budget on your business.

Three strategic priorities

1. Clear communication: Develop factual communications that help employees understand changes without causing unnecessary concern. Use multiple channels and segment your workforce to tailor messages to different groups. Remember, your employees want to understand what's happening to their take-home pay, not the intricacies of tax policy.
2. Comprehensive support: Ensure employees have access to appropriate support, whether through employee assistance programmes, financial education resources, or signposting to external guidance. The cumulative impact on employee finances makes both financial and mental health wellbeing support more critical than ever.
3. Strategic adaptation: Consider how these changes fit within your broader people strategy. This might be an opportunity to refresh your employee value proposition and ensure it meets current and future needs.

The budget represents significant changes to the employment and benefits landscape. HR teams play an important role as they can evaluate the impact of the budget on the business and help the organisations and employees navigate them successfully. 

Building flexibility into your people strategies helps manage both current changes and potential future adjustments. Focus on what you can control and influence, while staying informed about developing guidance and clarification.

Remember, salary sacrifice has always been about mutual benefit—helping employees increase their take-home value while reducing employer costs. The fundamental principle remains sound even as the specifics change.

Navigating budget changes requires good information and practical tools. Drawing on our experience supporting organisations through previous changes, we've developed resources to help.

Available support:

Book a consultation with our benefits experts to understand how Access Engage can help you navigate the changes whilst supporting your employees' financial wellbeing.

Register for our budget briefing for detailed analysis of the announcements and practical implementation guidance.

Every organisation faces these same challenges. Those managing best are taking practical steps, learning as they go, and keeping their people informed and supported.

For immediate support implementing your post-budget response strategy, or to understand how PeopleXD Evo and Access Engage can help you manage these confirmed changes, contact our team today.