Autumn Budget 2025: Full Take-Home Pay Impact Breakdown

The October 2025 Autumn Budget delivered the biggest single increase to employer National Insurance in decades, combined with a further freeze on income tax thresholds and a significant rise in the National Living Wage. Together, these changes have rippled through payslips, business cost structures, and hiring decisions across the UK.

This guide breaks down exactly what changed, when it took effect, and what it means in concrete pounds for workers at every major salary level. You will see comparison tables for 2024/25, 2025/26, and 2026/27, an analysis of who wins and who loses, and a clear explanation of why the employer NI hike does not show up directly on your payslip — but still affects you.

The Key Announcements and Their Effective Dates

Employer National Insurance: Threshold Down, Rate Up (April 2025)

The most significant employer-side measure took effect from 6 April 2025:

• The employer NI secondary threshold (the point at which employers start paying NI on employee earnings) was cut from £9,100 per year to £5,000 per year.
• The employer NI rate was raised from 13.8% to 15%.

Combined, these two changes mean employers pay NI at a higher rate on a much larger slice of each employee's wage. A worker earning £30,000 previously triggered employer NI on £20,900 (£30,000 minus the £9,100 threshold) at 13.8% — costing the employer £2,884. From April 2025, the same worker triggers employer NI on £25,000 (£30,000 minus £5,000) at 15% — costing £3,750. That is £866 more per employee per year.

The Employment Allowance — which offsets the first portion of employer NI for eligible smaller businesses — was increased from £5,000 to £10,500 to partially mitigate the impact on small employers. Businesses with a single employee paying themselves the NLW may pay little or no employer NI after the allowance. But the allowance does not help medium or large employers, who bear the full cost increase.

National Living Wage Rise (April 2025)

The National Living Wage rose from £11.44 per hour to £12.21 per hour from 1 April 2025 — a 6.7% increase. For workers on 37.5 hours a week, that equates to a gross annual salary rise from approximately £22,308 to approximately £23,810.

Note: From April 2026, the NLW rose again to £12.71 per hour, taking the annualised figure to approximately £24,785.

Income Tax Threshold Freeze Extended to 2028

The personal allowance (£12,570) and higher rate threshold (£50,270) remain frozen until April 2028 — a reconfirmation of the existing policy. This means:

• Workers receiving any pay rise are drawn progressively further into tax as a share of their income.
• More workers have crossed the higher rate threshold over time without the government changing the headline rate.
• By 2027/28, the Institute for Fiscal Studies estimated the freeze will have pulled the equivalent of several million additional taxpayers into higher-rate territory compared with if thresholds had risen with inflation.

Employee NI Unchanged

Employee NI rates and thresholds for 2025/26 and 2026/27 are unchanged from previous years:

• 8% on earnings between £12,570 and £50,270
• 2% on earnings above £50,270
• Lower earnings limit: £6,396 (below which no NI is paid or credited)

Take-Home Pay: 2024/25 vs 2025/26 vs 2026/27

The following table uses the standard personal allowance (£12,570), standard 20%/40% income tax rates, and employee NI rates of 8%/2%. It assumes no pension contributions, no student loan, and does not include the employer-side cost. These are employee take-home figures.

£25,000 Gross Salary

At £25,000, take-home has not changed in employee terms between these years, because employee rates and thresholds are identical. The worker feels the freeze only when they receive a pay rise — the new money is taxed and NI'd at the margin.

£35,000 Gross Salary

Same pattern. The freeze is invisible in isolation — it manifests as bracket creep when salaries rise.

£50,000 Gross Salary

£75,000 Gross Salary

At £75,000, part of income falls into the higher 40% rate band (on earnings above £50,270).

£100,000 Gross Salary

At £100,000, income enters the personal allowance taper zone (PA reduces by £1 for every £2 of income above £100,000). This creates an effective 60% marginal rate on income between £100,000 and £125,140.

Note: These figures are simplified. For personalised take-home calculations at your exact salary, use our take-home pay calculator.

The Real Impact: Bracket Creep in Action

If these tables look static, that is the point — for workers whose nominal salary has not changed, the employee-side position has not changed either. The Budget's freeze does its work over time.

Consider a worker on £48,000 in 2021/22 who receives 3% annual pay rises:

• 2022/23: £49,440 — still basic rate only (HRT at £50,270)
• 2023/24: £50,923 — just over the higher rate threshold; £653 taxed at 40% instead of 20%
• 2024/25: £52,451 — £2,181 above HRT; extra tax from freeze vs indexed threshold
• 2025/26: £54,024 — £3,754 above HRT; further drag
• 2026/27: £55,645 — £5,375 above HRT

If the higher rate threshold had risen with inflation at 5% per year from 2021/22, it would be approximately £64,000 by 2026/27 rather than frozen at £50,270. That gap represents thousands of pounds in additional tax for workers who have had even modest pay rises.

Who Wins and Who Loses

Who Benefits

NLW workers are clear winners. A worker on 37.5 hours on the NLW went from £22,308 gross (April 2024) to £23,810 gross (April 2025) to £24,785 gross (April 2026). Even after tax and NI, this is a genuine real-terms income improvement.

Small businesses qualifying for the full Employment Allowance can offset up to £10,500 of employer NI per year (up from £5,000). A micro-business with two or three staff may have seen its employer NI bill held flat or even reduced despite the rate increase, depending on the wage bill.

Workers receiving substantial pay rises benefit in nominal terms, though the freeze means more of each rise is absorbed by tax.

Who Loses

Medium and large employers face the full cost of the employer NI increase — higher rate, lower threshold, no Employment Allowance benefit. For businesses employing 500 people with an average salary of £35,000, the additional employer NI cost from the 2025 Budget changes is approximately £4.3 million per year compared with the 2024/25 regime.

Workers in frozen-threshold bracket creep feel a steady real-terms squeeze as inflation pushes nominal wages up but more income is taxed at the margin.

Part-time workers earning between £5,000 and £9,100 annually become more expensive for employers because they were previously below the secondary threshold. A worker earning £8,000 a year (e.g., 15 hours a week at £10/hour) now costs their employer 15% NI on £3,000 of earnings, where they previously cost nothing.

Business Impact of the Employer NI Rise

The increased employer NI cost has affected business behaviour in several visible ways since April 2025:

Hiring decisions. For roles where headcount is flexible, the higher employment cost has led some businesses to hire fewer permanent staff, extend fixed-term contracts, or increase use of self-employed contractors (noting that IR35 rules still apply to many such arrangements).

Pay review restraint. Businesses absorbing a per-head NI cost increase have had less budget available for base pay rises. Where unions have negotiated on total employment cost rather than take-home pay, the NI rise has crowded out wage growth.

Automation investment. In labour-intensive sectors (hospitality, retail, logistics), the combined impact of the NLW rise and employer NI increase has accelerated investment in automation and self-service technology.

Salary sacrifice take-up. Salary sacrifice pension contributions reduce employer NI because contributions made via salary sacrifice do not attract NI on either side. Following the April 2025 changes, take-up of salary sacrifice arrangements increased as employers and employees both benefit: the employer's NI bill falls, and workers can receive the saving as additional pension or higher take-home.

What This Means for Your Payslip

If you are an employee, your payslip shows employee income tax, employee NI, and any other deductions. Employer NI does not appear on your payslip — it is a cost borne separately by your employer.

However, it affects you indirectly:

• In pay negotiations, employers who are spending more on NI have less to offer in base salary.
• In decisions about benefits, the cost of providing each employee with a job has risen.
• For those on variable hours or casual contracts, hours may have been reduced to control total employment costs.

For an accurate picture of your own position, enter your gross salary into our take-home pay calculator to see exactly what you keep after income tax and employee NI.

Key Takeaways

• The October 2025 Budget cut the employer NI secondary threshold from £9,100 to £5,000 and raised the rate from 13.8% to 15%, effective April 2025 — significantly increasing the cost of employing each worker.
• Employee take-home pay tables look identical year-on-year at the same salary because employee NI rates and income tax thresholds are unchanged — the freeze damages workers through bracket creep when they receive pay rises.
• NLW workers are direct beneficiaries: the NLW rose to £12.21 in April 2025 and £12.71 in April 2026.
• The personal allowance (£12,570) and higher rate threshold (£50,270) remain frozen until April 2028, meaning real-terms tax rises for anyone receiving pay increases.
• Salary sacrifice pension contributions reduce employer NI, making them more attractive to both employers and employees post-Budget.