The Chancellor of the Exchequer, Rachel Reeves, announced several updates from an employment tax perspective in the Autumn Budget, the most notable of which are the freezing of the personal income tax thresholds and the change to the National Insurance treatment of salary sacrifice pension schemes. There are a number of other measures that are worth noting. 

National Insurance contributions (NICs) on salary-sacrifice pension schemes

From April 2029, salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from NICs. This means that pension contributions above £2,000 made by employees through a salary-sacrifice scheme will be treated as ordinary employee pension contributions and therefore be subject to both employee and employer NICs. 

Employer pension contributions will continue to be free of NICs. 

This measure will not limit how much employees can contribute into their pension schemes, including via salary sacrifice, and these contributions will remain exempt from income tax (subject to the pensions annual allowance charge). 

Employees who choose to sacrifice salary to receive Tax Free Childcare or Child Benefit can keep doing so, bearing in mind that any salary-sacrifice contributions above £2,000 will be subject to employee and employer NICs. 

The Government anticipates the following responses to this change by employers and employees.

1. Employers switching to ordinary contributions: employers could formally replicate salary-sacrifice through an agreement to reduce wages and increase employer pension contributions. However, such arrangements will need to be considered in the light of interaction between Operational Remuneration Agreement rules and employment law meaning that such reductions would need to be agreed with the entire workforce.
2. Employees switching to relief at source (RAS) schemes: employees may switch to making ordinary pension contributions, some of which will be to RAS schemes. Where an employee contributes to a RAS scheme, they will initially pay higher and additional rate income tax on their pension contributions, and then reclaim this through their self-assessment return in the next year. 

Increase on dividends, property, savings income tax rates

The Government will introduce several changes to the non-labour components of income tax, including a 2 percentage point increase to:

• the basic and higher rates of tax on dividends (from 8.75% to 10.75% and from 33.75% to 35.75% respectively) from April 2026. The additional rate will remain unchanged at 39.35%;
• the basic, higher and additional rates of savings income tax, increasing them to 22, 42 and 47 per cent respectively from April 2027;
• the basic, higher and additional rates of property income tax, increasing them to 22, 42 and 47 per cent respectively from April 2027.

Once all the new income tax rates have come into effect in April 2027, the income tax ordering rules will be changed so that the personal allowance will be deducted against employment, trading or pension income first.

Income tax and employer NICs thresholds

This Budget extended the freeze of personal tax thresholds for a further three years. The income tax personal allowance, higher rate threshold and additional rate thresholds will remain frozen until 2030/31. The secondary threshold (for employer NICs), which was reduced from £9,100 to £5,000 as part of the Autumn Budget 2024, will be frozen at £5,000 until 2030/31.

Student loan freeze

The Government will freeze the repayments and interest rate thresholds for Plan 2 student loan repayments for three years starting from the 2027/28 tax year.

Individual savings account (ISA)

The Government has confirmed that the contribution limit into a cash ISA will be reduced from £20,000 to £12,000 from April 2027 for those under 65. The annual contribution limit to stocks and shares ISAs will remain at £20,000.

Enterprise Management Incentive (EMI) plan eligibility

The company eligibility limits for EMI plans will increase from 6 April 2026, with the employee limit doubling to 500 employees and the gross assets limit quadrupling to £120m. The limit on the aggregate value of EMI options a company can grant at any time will also be doubled to £6m. 

The exercise period for options granted under EMI plans will also be extended from 10 years to 15 years. 

These increases will enable companies to continue to offer EMI options as they scale and may enable additional companies to adopt EMI plans provided they meet the other qualifying criteria. 

Private Intermittent Securities and Capital Exchange System (PISCES) 

The Government has confirmed that legislation will be introduced to enable amendments to existing Company Share Option Plan (CSOP) and EMI option agreements to include a sale on PISCES as an exercisable event, conditional on the shares being sold on PISCES as soon as reasonably practicable after the exercise, without impacting the tax advantages of the options. This was previously announced on 15 May 2025, and EMI and CSOP option agreements can be amended at any time on or after 15 May 2025.  

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) limits

The following EIS and VCT qualifying limits for certain eligible companies will increase from 6 April 2026:

• the gross assets requirement for both schemes will increase to £30m immediately before the issue of shares and securities, and £35m immediately after the issue (from £15m and £16m respectively);
• the annual investment limit will double to £10m for all companies, and to £20m for knowledge intensive companies;
• the lifetime investment limit will also double to £24m for all companies and £40m for knowledge intensive companies; and  

The income tax relief that is available for an individual investing in VCT will be reduced from 30% to 20%, effective from 6 April 2026. 

Employer Ownership Trusts (EOT)

The 100% relief that is currently available on qualifying disposals of shares in a trading company or a parent company of a trading group to an EOT will be reduced to 50%, effective from 26 November 2025. 

As a result of this measure, half of the gain realised on qualifying disposals of shares to EOTs that were previously not subject to capital gains tax, will now be subject to capital gains tax at a rate of 24% for higher rate taxpayers or 18% for basic rate taxpayers. 

PAYE notifications and overseas workday relief

Where employees who are qualifying new residents and eligible for the Foreign Income and Gains (FIG) regime make a notification to HMRC (a section 690 application), to limit the portion of their employment income that is subject to PAYE, the relief that can be requested through the notification is capped at 30% of their employment income. 

This aims to align the relief provided from PAYE with the relief that will be available to the eligible employee through Overseas Workday Relief on their tax return. This change will only impact employees who are subject to the FIG regime and will not impact PAYE notifications relating to tax non-resident employees or treaty non-resident employees. 

Tax relief on non-reimbursed homeworking expenses

Employees who are currently eligible to claim a deduction from income tax for household costs as a result of being required to work from home by their employer will no longer be able to claim a deduction for these costs from 6 April 2026. 

This change will not impact the ability for employers to reimburse additional household costs of eligible employees without deducting income tax and National Insurance. 

Umbrella companies

The Government has confirmed that the previously announced new legislation aimed at tackling non-compliance in the umbrella company market will be effective from 6 April 2025. This will include making UK agencies that supply workers to end clients jointly and severally responsible for the PAYE liabilities of the umbrella company that employs the relevant worker or, in the absence of a recruitment agency, making joint and several liability attach to the end client.

Employee Car Ownership Schemes (ECOS)

The Government has confirmed that operative date for the amendments to the benefit in kind rules so that vehicles provided through ECOS arrangements will be deemed as taxable benefits when made available on restricted terms will be delayed to 6 April 2030. Arrangements existing prior to commencement will continue without a change in treatment until the earlier of the arrangement being varied, renewed or 6 April 2032.