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 

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. 

Rail and Bus Fare Freeze 

Rail fares and the £3 bus cap in England will both remain frozen until 2027. While this does not reduce travel costs, it offers stability during a period of broader financial pressure. 

Impact: 

• More predictable commuting costs 
• Support for hybrid working where regular travel is needed 

“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. Travel support will be more important 

Even with fare freezes, transport remains a major cost. Employers may wish to consider how travel-related policies, allowances or benefits can support employees. 

4. Clear communication will be key

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

5. Time to review long term benefits strategy

With pressures increasing, HR teams have the opportunity to support teams with a benefit and reward strategy that helps people feel supported and valued.