The United Kingdom Autumn Budget 2026: Key takeaways for employers

The UK Autumn Budget 2026 introduced a range of measures affecting businesses, their employees, and the wider labor market, from increases to the minimum wage to proposed reforms designed to increase labor mobility. While some of these changes will increase employment costs and introduce new tax and regulatory considerations, others present an opportunity to review workforce planning, retirement programs, salary sacrifice arrangements, employee financial wellbeing initiatives, and talent retention strategies.

Our expert UK People Solutions team outlines the headline changes and explores the strategic moves that employers can make.

What was announced in the Autumn Budget?

• A new Pension Tax Allowance will be introduced from 6 April 2027 for individuals who have reached State Pension age. Those with total annual income up to the new full State Pension (GBP 13,036.40 for the 2027-28 tax year) will receive a tax reduction (up to GBP 93.28 for the 2027-28 tax year), offsetting the income tax that would otherwise arise because the new full State Pension exceeds the frozen Personal Allowance of GBP 12,570. Individuals with income slightly above this threshold may also receive a lower tax reduction, which will gradually taper off as income increases. The reduction will be applied automatically by HMRC and is currently scheduled to apply for the 2027-28, 2028-29 and 2029-30 tax years.

• Planned cuts to the cash ISA allowance have been reversed. Under plans put forward by the previous Chancellor that were due to take effect from April 2027, Rachel Reeves, the cash Individual Savings Accounts (ISA) allowance was due to fall from GBP 20,000 to GBP 12,000 for savers under the age of 65, while uninvested funds in stocks and shares ISAs would have become subject to a new 22% tax charge. These scheduled changes will no longer go ahead. The Budget also put forward new initiatives for first-time homebuyers, including a First Time Buyer ISA to replace the existing Lifetime ISA from April 2029, and a new equity-loan scheme.

• The minimum wage will increase by 3.9% on 1 April 2027, from GBP 12.71 to GBP 13.21 for employees 21 and over. The rate for 18 to 20-year-olds will also increase by 3.9% from GBP 10.85 to GBP 11.27 on 1 April 2027. The likely above-inflationary increases mean that businesses continue to absorb higher employment costs.

• More help for small businesses, via an increase in the threshold for small business rate relief, a UK tax scheme that reduces or eliminates business rates (local property taxes charged on commercial premises), for retail, hospitality and leisure businesses from GBP 12,000 to GBP 18,000 from April 2027. This follows the Government’s July 2026 announcement of a 20% reduction in business rates bills for pubs, clubs, and smaller live music venues which will take effect from April 2027. The Government estimates that 70,000 businesses will see their rates fall to zero. The Budget also introduced a series of new allowances for founders and young entrepreneurs.

• Commitments to encourage talent mobility, including reforms to the use of non-compete clauses, and a proposed consultation on the wider use of restrictive practices. Details of these reforms will be set out in early 2027. There were also pledges to reform certain visa requirements for skilled or high-potential individuals.

• A temporary household support package focused on cutting energy bills, including the removal of standing charges on gas bills, extension of the VAT cut on electricity bills to July 2027, and a new GBP 100 energy payment for households in lower-value council tax bands (A-D).

• Targeted tax measures for specific sectors, including an increase in Machine Games Duty from 20% to 25% on games with takes over GBP 1 from April 2027, and a doubling of the bank corporate tax surcharge to 6% from January 2027, lasting 15 months.

Despite pre-Budget speculation, no updates were announced to the rate of Capital Gains Tax (CGT). There were also no further changes to the rates of Income Tax, Value Added Tax (VAT), employers’ National Insurance (NI) contributions, or Stamp Duty Land Tax (SDLT).

What’s changing with inheritance tax?

The Budget contained no changes to the Government’s existing inheritance tax (IHT) reforms, first announced in the Autumn Budget 2024. The reforms will end a longstanding IHT exemption for most unused pension savings. From 6 April 2027, unused pension funds and pension death benefits will be included when calculating the value of a deceased person’s estate for IHT purposes. Depending on the circumstances, beneficiaries may also remain liable for income tax when drawing inherited pension benefits.

Updates to the pension “triple lock”

During the Labour Party Conference on 29 September 2026, ahead of the Budget announcement, Prime Minister Andy Burnham announced a policy to scrap the “triple-lock” mechanism on the State Pension. Under the triple-lock, the State Pension increases each year by the highest of 2.5%, inflation or earnings growth, helping to protect pensioners’ incomes from rising living costs. The triple-lock will remain in place until 2030 – after the next election – at which point it is expected to become a “double-lock” (rising in line with either prices or 2.5%). The government plans to legislate the change ahead of its proposed implementation in 2030.

Salary sacrifice changes still due in 2029

There were also no updates to the existing plans for salary sacrifice. Currently, all salary-sacrificed pension contributions are exempt from NI contributions. From April 2029, salary-sacrificed pension contributions above an annual GBP 2,000 threshold will no longer be exempt. Above the new cap, usual NI rates will apply – at 15% for employers, 8% for employees on salaries below GBP 50,270, and 2% on income greater than that. Once introduced, the change will substantially increase employers’ NI liabilities, and the overall cost of employment. More details on how employers can make the most of pension salary sacrifice before 2029 may be found in our article here (opens a new window).

Employer action: PREPARE TO ACT

The implications of the Budget will not impact every employer in the same way. Nevertheless, our UK People Solutions experts have drawn out a few key themes that are likely to shape reward and benefit strategies in the years ahead:

• Growing complexity of retirement planning with IHT on pensions and forthcoming changes to salary sacrifice. For employees, the changes are likely to mean greater emphasis on retirement and estate planning strategies. Employers should prepare for increased demand for financial education and wellbeing. Higher earners and older employees may seek more personalized guidance around pension withdrawals and legacy planning. There may also be increased interest in broader retirement support offerings.

• Financial wellbeing remains a workforce issue – the cost of living remains topical, despite efforts to alleviate the pressure on households. The energy cap is forecast to rise by 16% in January, to nearly GBP 2,000, while broader inflationary pressures continue to hit incomes. Cost-of-living concerns remain linked to stress, wellbeing and productivity. Employers may face renewed pressure to support employees through financial wellbeing programs, emergency savings products, employee assistance programs (EAPs), and employee discount schemes.

• Retention strategies must evolve – Evidence from the Competition and Markets Authority suggests that more than a quarter (opens a new window) of UK employees are subject to non-compete clauses. Potential restrictions on the use of non-compete clauses could place employers under greater pressure to retain key talent, particularly for higher earners – although details of any reforms will not be set out until early 2027. Engagement, culture, and career progression could play an even greater role in retaining key talent. Depending on their extent, the reforms could also prompt reviews of employment contracts and alternative retention mechanisms, such as extended notice periods.

• Cost management is crucial – With no change to NI contributions, along with another uprating of the minimum wage, employers continue to absorb high employment costs – with small- to medium-sized enterprises (SMEs) feeling the greatest impacts. These ongoing pressures will likely encourage scrutiny of reward design, salary sacrifice arrangements, and workforce productivity initiatives, as employers look to offset costs. The recommendations of the forthcoming youth employment review could bring further changes to apprenticeship, early careers and workforce participation strategies.

Review your people strategy

From talent retention to retirement support and employee financial wellbeing, the policies announced in the Budget have the potential to shape workforce planning in the coming years. With that in mind, now is a valuable opportunity for employers to review their reward, wellness, and benefits programs to ensure they remain aligned with the needs of their people and business.

Lockton's UK People Solutions team can support employers in translating these Budget announcements into practical workforce strategies. Whether assessing the impact of pension and inheritance tax reforms, reviewing reward and benefits programs, modeling future employment costs, or enhancing financial wellbeing offerings, our specialists can help organizations understand the implications and identify appropriate next steps.

To explore any of the issues discussed in this article, reach out to your usual consultant or contact a member of our UK People Solutions team.

Further Information

Budget 2026 | GOV.UK (opens a new window)