What the 26 November UK Budget Means for Employers and SMEs

The UK Budget announced on 26 November 2025 introduces several changes that will affect employers and small to medium-sized businesses over the coming years. The focus of this Budget is on raising revenue and creating longer-term financial stability. Below is a straightforward overview of the key points relevant to SMEs.

Salary Sacrifice Pension Changes

From April 2029, the amount of pension contributions that can be made via salary sacrifice without National Insurance will be capped at £2,000 per year. Any amount above this will attract employer and employee NI.

This change reduces some of the tax efficiency of salary sacrifice schemes, particularly for higher earners or employers offering enhanced pension benefits. For many SMEs who contribute below this threshold, the immediate impact will be limited, but it is still important to plan ahead.

Minimum Wage Increases

The National Living Wage and other minimum wage rates will rise from April 2026. Employers in sectors with lower-paid workers, such as hospitality, care, retail and services, will need to factor these increases into payroll planning.

While this may raise labour costs, it can also support retention and competitiveness in the job market.

Tax Thresholds Frozen

Income tax and National Insurance thresholds remain frozen. As wages rise over time, more employees will fall into higher tax and NI brackets.

This does not change how employers operate day-to-day, but it may influence salary expectations and take-home pay discussions during performance and pay reviews.

Business Rates Reform

Further business rates reform is planned, particularly affecting retail, leisure, hospitality and small premises. Some businesses may benefit from updated reliefs, while others may see increases depending on their property type and valuation.

This is an area SMEs should monitor closely as more detail is released in 2026.

What SMEs Should Consider

The Budget signals a continued period of cost pressure for many employers. Planning early will help businesses manage these changes more effectively. Key steps include reviewing pension arrangements, forecasting wage costs, updating pricing or budgeting models, and communicating clearly with staff about any changes that may affect them.

Summary

The Autumn Budget 2025 introduces a number of changes that will shape employment costs and workforce planning over the next few years. While the headline measures offer support to low-paid workers and aim to provide longer-term economic stability, they also signal a period of adjustment for employers.

For SMEs, the key themes are preparation and clarity. Higher wage rates, frozen tax thresholds and future pension reforms mean it will be important to review budgets, pay structures and benefit arrangements in good time. None of the measures require immediate changes, but they do encourage businesses to plan ahead and ensure their workforce strategies remain sustainable.

There are also opportunities for organisations willing to rethink how they manage training, benefits and reward. With thoughtful planning, SMEs can balance cost control with competitiveness and continue to offer value to employees in a changing landscape.

Overall, this Budget reinforces the importance of foresight, flexibility and clear communication as businesses prepare for the years ahead.

Craven’s Take

From our perspective as HR, Health & Safety and Training specialists, this Budget is less about sudden change and more about understanding what’s coming and planning early. The measures announced will gradually shape employment costs, pensions and workforce expectations over the next few years, and SMEs that prepare now will be in a stronger position.

For most of our clients, the headline is simple: nothing here requires immediate action, but everything here benefits from forward thinking. Reviewing your pay structures, forecasting future wage pressures, and understanding how the pension cap may affect higher-contributing staff will help avoid surprises later on.

There is also an opportunity. As traditional salary-sacrifice models become less advantageous, businesses can explore more modern, flexible approaches to reward, wellbeing and skills development. Many of our clients are already moving towards broader value-based benefits rather than purely financial incentives.

Craven will continue supporting organisations through these changes, helping them stay compliant, cost-aware and people-centred. With the right planning and clear communication, SMEs can navigate the next few years confidently and continue to build resilient, engaged and future-ready teams.