While income tax rates on earnings from a job or self-employment were not increased, income tax thresholds will now remain unchanged until 2031.

Future pay increases will see a greater proportion of income brought into tax, achieving the same result as a tax rate rise. Workers on either the national minimum wage
or national living wage will see increases in their pay from April 2026.

The rates of National Insurance Contributions (NIC) paid by employees and employers remain unchanged.

Employees paying into a workplace pension scheme under the salary sacrifice method will see annual contributions above £2,000 a year subject to NIC from April 2029.
Many working people are also business owners, property owners and savers. See the relevant sections for tax increases that will apply.

The minimum hourly rates that employers must pay their employees go up from 1 April 2026.

Employers must pay their employees at least these minimum rates to avoid penalties, back payments and other regulatory action. If you have employees paid at or just above these levels, you need to ensure that birthdays, full working hours and deductions are properly captured and dealt with. Please contact us for any support with business payrolls, including the operation of minimum wage levels.

National Insurance Contributions (NICs)

NICs deducted from employee wages remain at the same levels as we head into 2026/27.
This means that, for employees, no NICs are deducted on the first £12,570 of pay, then a
rate of 8% applies on earnings up to £50,270, with a rate of 2% applied thereafter.
For employers, the rate of NICs will remain at 15% after the first £5,000* paid to each
employee. The available employment allowance to offset this cost remains at £10,500 for eligible claimants.

*A higher threshold of £50,270 applies for employees who are under 21 and apprentices
under 25. Other variations can also apply.

Salary sacrifice for pension contributions

From 6 April 2029, the amount that is exempt from NICs will be capped at £2,000 a year
for employee contributions made via salary sacrifice. Any employee contributions above
this amount made under salary sacrifice will be subject to employer and employee NICs.

Employees can still contribute as much as they want to their pensions, including via salary sacrifice, and these contributions will still be exempt from income tax (subject to the usual limits).

Removal of tax relief on non-reimbursed homeworking expenses

From 6 April 2026, employees will no longer be able to claim tax relief on additional
household expenses incurred in employment duties that are not reimbursed by the
employer. To date, a claim at the rate of £6 per week has been allowed. Employers can
still reimburse employees for these costs where eligible without deducting income tax and NICs.

Please get in touch with our team if you have any queries about how to support your employees with the changes relating to the 2025 Budget.