How Will Yesterday’s Budget Affect Payroll?

Yesterday’s Budget delivered a mixture of anticipated updates and long term measures that reach well beyond the next tax year. Much of the detail had already circulated in advance, yet the confirmed announcements will have a notable impact on payroll planning for both employers and employees. Below is a summary of the key changes that directly affect payroll, with links to the relevant HMRC guidance.

National Minimum Wage increases from April 2026

Further information on statutory rates can be found on the HMRC website:
https://www.gov.uk/national-minimum-wage-rates

Confirmed rates from April 2026:

• 21 and over: £12.21 rising to £12.71 per hour

• Ages 18 to 20: £10.00 rising to £10.85 per hour

• Apprentices and ages 16 to 17: £7.55 rising to £8.00 per hour

This will increase wage bills for employers with minimum wage staff. It is a positive development for lower paid employees, although it may influence entry level recruitment for younger workers.

Tax thresholds frozen

HMRC threshold information is available here:
https://www.gov.uk/income-tax-rates

The Budget confirmed extended freezes on several key thresholds:

• Personal Allowance frozen until at least 2030 to 2031

• Secondary National Insurance threshold fixed until 2027 to 2028

• Additional Rate Tax threshold held at £125,140 until 2027 to 2028

As earnings increase while allowances remain unchanged, more employees will be drawn into higher tax brackets. Employers may also face higher National Insurance liabilities as a result.

Salary sacrifice pensions

Guidance on salary sacrifice can be found here:
https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye

From April 2029, National Insurance relief on pension salary sacrifice will be capped at £2,000 per annum. This reduces tax efficiency for higher earners and may influence how employers structure pension arrangements.

Student loan repayment rates and thresholds

Further details on student loan repayment plans are available here:
https://www.gov.uk/repaying-your-student-loan

Repayment rates and thresholds will remain frozen until 2027 to 2028, which means graduates may repay more quickly as their income rises above static thresholds.

Mileage tax for electric vehicles

Information on current business mileage rules is available here:
https://www.gov.uk/guidance/advisory-fuel-rates

A new mileage charge for electric and plug in hybrid company cars will apply from 2028 to 2029:

• 3p per mile for electric vehicles

• 1.5p per mile for plug-in hybrids

This will add cost for businesses with electric company cars and for employees claiming business mileage.

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Supporting your payroll through the changes

These measures will influence payroll operations, budgeting and long term workforce planning. As each update takes effect, we will ensure that all client payrolls remain fully compliant and prepared.

If you would like guidance on how these changes apply to your business, please feel free to get in touch.

info@augustuspayroll.co.uk