UK AUTUMN BUDGET 2025: PAYROLL & PENSION UPDATES

ASESA Solutions Ltd - UK AUTUMN BUDGET 2025: PAYROLL & PENSION UPDATES

The UK Government’s Autumn Budget 2025 introduces further changes that businesses and individuals should be aware of. Below, we highlight two updates that may affect you in the coming years.

National Living Wage & Minimum Wage Increases

The National Minimum Wage (NMW) and National Living Wage (NLW) set the legal minimum hourly pay employers must provide, based on age and employment status.

From April 2026, the new rates will be:

• National Living Wage (age 21 and over): £12.71 per hour

• Age 18–20: £10.85 per hour

• Age 16–17 and apprentices: £8.00 per hour

These increases will increase wage costs for many employers, especially those with hourly paid staff. Employers should update payroll systems accordingly and be aware that HMRC enforces minimum wage compliance, with penalties for underpayments.

Salary Sacrifice Pension Contributions – National Insurance Changes

Salary sacrifice allows employees to give up part of their salary in exchange for increased pension contributions, usually saving National Insurance (NI) for both employee and employer.

From April 2029, this NI advantage will be limited:

• The first £2,000 per year of salary sacrifice pension contributions will remain NI-free

• Any amount above £2,000 will be subject to National Insurance

  
  

Example: If an employee sacrifices £5,000 into their pension:

• £2,000 remains NI-free

• £3,000 is subject to employer NI

• At the current employer NI rate of 15%, this results in an additional £450 NI cost for the employer

  
  

This change is most relevant for businesses offering higher pension contributions or salary sacrifice arrangements for directors and higher earners.

Conclusion

These measures highlight the importance of forward planning around payroll and pensions. While some changes apply sooner than others, early awareness can help businesses manage costs and remain compliant. Our next edition will be the final update on the Autumn Budget and what it means for your business.