Budget 2025: What Employers and Business Owners Need to Know

The 2025 Budget has landed and while the headlines are busy debating winners and losers, employers are left asking a much more practical question: “What does this actually mean for my business, my people and my costs?”

At Altum HR, we’ve pulled together the changes that matter most for employers, HR teams and business owners. No jargon. No political spin. Just the real‑world impact.

The Big Picture: Costs Are Rising, Planning Is Essential

This year’s Budget continues a familiar theme: rising employment costs, frozen thresholds and more pressure on payroll. For many organisations, 2026 will be a year where workforce planning, reward strategy and cost control become even more important.

Let’s break it down.

1. Tax & Payroll Changes Employers Need to Prepare For

Frozen Income Tax & NIC Thresholds (again)

Thresholds remain frozen until 2028–29. This means as wages rise, more employees drift into higher tax bands – without any change to their standard of living.

What this means for employers:

• Expect more questions about take‑home pay.
• Payroll costs may rise as staff push for increases to offset tax drag.
• Financial wellbeing support becomes even more valuable.

 Salary‑Sacrifice Pension Changes

From 2029, only the first £2,000 of salary‑sacrifice pension contributions will be NIC‑free. Anything above that will attract NICs.

Impact:

• Senior leaders and high earners will feel this most.
• Employers may need to rethink reward packages and executive benefits.

Dividend, Savings & Property Income Tax Increases

A 2‑point rise across the board.

Impact:

• Owner‑managed businesses who pay themselves via dividends will see a personal tax hit.
• Some may reconsider how they structure remuneration.

2. Wage Changes: Budgeting for 2026 Starts Now

Minimum Wage Increases (April 2026)

• Over 21s: £12.71
• 18–20: £10.85
• Under 18s/apprentices: £8.00

These increases will be felt most in sectors with large frontline workforces – care, retail, hospitality, facilities, cleaning and logistics.

What employers should do now:

• Start modelling the impact on your 2026 payroll.
• Review pay structures to avoid compression issues.
• Consider how rising wages affect recruitment and retention strategies.

 Real Living Wage Expected to Rise Sharply

For employers who voluntarily align to RLW, this will add further cost pressure.

3. Business‑Relevant Measures Worth Noting

Fuel Duty Freeze Continues

A small but welcome relief for fleet‑heavy sectors and businesses with field‑based teams.

Property‑Related Tax Changes

Higher taxes on high‑value properties may affect business owners with investment portfolios.

EV Pay‑Per‑Mile Charging on the Horizon

Not immediate, but something to watch if you operate company car schemes or plan to electrify your fleet.

4. What This Means for Employers in 2025–26

The Budget reinforces what many businesses already feel: employment costs are rising, and strategic workforce planning is no longer optional.

Here’s what we expect to see next year:

• More pressure on payroll budgets
• Increased employee queries about tax and take‑home pay
• Greater focus on reward strategy and benefits design
• A need for clearer communication around pay, pensions, and financial wellbeing
• Leadership teams revisiting 2026 budgets earlier than usual

How Altum HR Can Support You

Whether you need help modelling the impact of wage changes, reviewing your reward strategy, or communicating these updates to your teams, we’re here to support you through the changes ahead.

Email enquiry@altumhr.co.uk or call us on 0800 048 5764