The Autumn Budget: Turning policy into value

Minimum wage increase boosts lower-income staff 

What’s changing:

From April 2026, minimum wage rates will rise across all age groups. This supports lower earners but increases payroll costs for organisations with large frontline or hourly workforces.

Impact:

• Higher payroll costs for organisations with larger populations of lower-paid employees, squeezing budgets further.
• Improved disposable income for lower-paid workers, easing inflationary pressures. 

Income tax and NI threshold freeze  

What’s changing:

The freeze on income tax and NI thresholds is extended by a further three years until 2030/2031. As wages rise, more employees will gradually shift into higher tax bands. 

Impact:

• More employees will gradually drift into higher tax brackets as wages rise (“fiscal drag”).
• Real take-home pay reduces over time, putting pressure on financial wellbeing.

Salary sacrifice pension rule change

What’s changing:

From 2029, the National Insurance saving on pension salary sacrifice will be capped at £2,000 per year. Contributions above this level will incur NI for both employees and employers. 

Impact:

• Reduced efficiency of a key reward mechanism
• Potential changes to pension engagement and communications
• Need to review total reward positioning for mid-to-higher earners
• Other salary sacrifice schemes remain unaffected 

“The changes to pension salary sacrifice coming in 2029 will influence how employees experience their pay and benefits. As the value from the benefit lowers, organisations will need new, practical ways to support financial wellbeing and protect take-home pay. By broadening tax-efficient savings and pairing them with everyday benefits people genuinely use, HR teams can reinforce a sense of value, recognition and reward.”

Robert Hicks, Chief People Officer at Perkbox 

Mandatory payrolling of benefits

What’s changing:

While it wasn’t announced in this budget, it’s worth keeping in mind that from 2027 it will be mandatory to payroll the benefit in kind (BiK) on employee benefits. This change removes the need to use annual P11D forms.

Impact:

• Internal payroll processes may change
• Need to communicate any changes in process to employees

Commuting costs changes

Tax on electric vehicles 

What’s changing:

A new tax on electric and hybrid vehicles begins in 2028. It will see EV drivers paying 3p per mile, and hybrid drivers 1.5p per mile.

Impact: 

• Increases the cost of EV ownership – for example, an EV clocking up 8,500 miles in a year would pay around £255 (BBC) 
• Affects employees who use EVs for commuting or business travel
• For some company car arrangements, this will be an additional employer cost

Benefit in Kind easement for plug-in hybrids

What’s changing:

An easement on the planned increase in Benefit in Kind (BiK) for Plug-in Hybrid Electric Vehicle (PHEV) company cars was announced. This has now been delayed until 2028.

Impact: 

• Temporary relief from higher BiK costs for employees and Class 1a NICs for employers
• Helps offset the cost increase from the new electric car tax

Employee car ownership schemes (ECOS) deferred

What’s changing:

The government has deferred the taxation of employee car ownership schemes (ECOS) from 2026 to 2030. Under the new rules, some ECOS vehicles may be reclassified as company cars, making them subject to benefit in kind (BiK).

Impact: 

• Employers and employees have more time to prepare for the change 
• From 2030, some employers may face higher Class 1A National Insurance costs, and affected employees may pay BiK on reclassified vehicles.

“The Autumn Budget continues to squeeze take-home pay. As Employers you can make the biggest difference by helping people stretch what they have, offering practical salary sacrifice options, boosting everyday savings, and supporting resilience through meaningful financial wellbeing and recognition tools.” 

Natalie Jutla, Head of Financial Wellbeing at Perkbox 

Emerging implications for reward and people strategy

While each measure plays a part, the overall picture is clear: continued pressure on take-home pay. 

1. Financial pressures will continue  

Fiscal drag, higher taxes on savings and new motoring costs will affect disposable income for wide segments of the workforce. Supporting financial wellbeing will remain a key priority for HR teams. 

2. Savings behaviours may change

With the new NI cap on pension salary sacrifice, some employees may reconsider how and where they save. Organisations may need to reinforce the value of pension saving and provide accessible guidance. 

3. Clear communication will be key

Straightforward guidance on pay, tax and financial planning can help reduce uncertainty and build trust. 

Reviewing your benefits strategy

With pressures increasing, now’s a good time to look at whether your reward and benefits meet the needs of your employees right now, and into the future.

Moving away from a one-size-fits-all approach and building in flexibility can help people feel supported and valued.

Building workforce resilience

Pressure on pay is likely to continue, so focusing on financial wellbeing can help people feel more confident in managing their money.

Making changes easier to understand in a clear, practical way can make a huge difference. When employees feel informed, they’re better equipped to handle what affects them day to day. 

This confidence and knowledge build over time and contributes to the small steps that strengthen overall financial resilience.