Post Budget delivery 2025, what can we take away from the impacts on Payroll
No surprise the Personal Allowance set at £12,570 is to be frozen for a further 3 years,this was originally due to end 5 April 2028, but is now extended to April 2031. The upper limit for National Insurance as it aligns to Tax is also frozen for the same period at £50,270. This could lead to many more employees’ earnings being subject to higher rate income tax.
National Minimum and Living Wage rate increases announced effective from 1 April 2026:
| Worker Types | Hourly rate |
| Apprentices and workers above compulsory school leaving age, but under 18 | £8.00 |
| Workers aged 18 – 20 | £10.85 |
| NLW 21 and over | £12.71 |
Pensioners – The triple lock will remain, increases to the weekly state pension effective 2026, for the Basic Pension will be £185.30 and the full state pension will be £241.30.
Tax relief on the Home Working Allowance will be removed from 6 April 2026.
The current amount that can be claimed can either be based on actual expenditure, with evidence, or at a fixed rate of £6 per week without providing receipts. Employers can chose to pay the weekly flat rate to employees without incurring any tax liabilities after this date, but are reminded that this payment must be for those that have a contractual arrangement that requires home working.
The Employment Rights Bill continues to ‘ping-pong’ between the House of Lords and Commons.Following a recent announcement late yesterday (27 November 2026), day one right protections for unfair dismissal has been modified, the Government U-turn will amend the proposal to a 6-month qualifying period before claims can be brought against an employer.
Other day-one rights as included in the Bill, for parental leave and Statutory Sick Pay remain unchanged.
Salary sacrifice National Insurance savings on pension contributions will change, effective from April 2029, restrictions will see a cap on the maximum contributions of £2,000 that NI relief will be allowed against. Any contributions above this will attract full Class 1 NI.
Taxable benefit charges will be applied to Employee car ownership schemes (ECOS) any vehicles provided under such schemes will be assessed under the benefit in kind rules from 6 April 2030. Closing the loophole on the contrived schemes. Transitional arrangements will apply for employees still in schemes established prior to that date. They will be able to use the previous treatment, until either the arrangement changes, is renewed, or until April 2032, whichever happens first.
Free apprenticeships will be offered to employers in the small to medium business sector (SME) previously they were given access to funding through Co-investment funds for those under age 25. It is not clear however whether this will take effect from 2026 or a later date. This is a continuation of the Government's ongoing reforms to Apprenticeships.
The sign-off of the Employment Rights Bill is still outstanding, initial intentions were that Royal Assent would have been granted in November, but we will have to watch this space for further announcements.
