This week’s Autumn Statement is more than a routine fiscal update; for the UK’s 5.6 million employing SMEs, it places the economic context firmly at the centre of their preparations for implementing the wide-ranging reforms within the Employment Rights Bill.
This article explores the fiscal environment in which SMEs must consider implementing the forthcoming reforms, and so, as announced this week, in the Autumn Statement:
Tax and National Insurance
-
Both the personal tax and employer National Insurance contribution (NIC) thresholds will be kept at their current level for three years until 2031
-
The amount that is exempt from NICs on salary-sacrificed employee pension contributions from April 2029 will be capped at £2,000
-
Corporation tax remains on at the current 25 per cent.
Youth Employment, Skills and Apprenticeships
-
A new “youth guarantee” programme will be funded providing access to apprenticeships, training, education opportunities or help in finding employment for all 18-21 year olds in England. After eighteen months, 18-21-year-olds will be offered paid work instead of benefits
-
SMEs will have apprenticeships for eligible under 25s paid for
Wages and Pay Requirements
-
The minimum wage for workers over the age of 21 will rise to £12.71 in April 2026. Those aged 18-20 will get £10.85 per hour and the rate for under 18s and apprentices will increase to £8 per hour
-
Employers paying the real living wage will have to increase staff pay to £13.45 per hour for outside London and £14.80 per hour for those in London (95p rise) and have until 1 May 2026 to enact the rise but are advised to do so as soon as possible
Transport and Environmental Charges
-
A new mileage-based charge on battery electric and plug-in hybrid cars will come in from April 2028. Hybrid plug-ins will pay 1.5p per mile while fully electric vehicles will pay 3p per mile
Business Taxes and Reliefs
-
Reforms to the taxation of gambling
-
Tax administration, compliance and debt collection measures, which raise
-
Capital gains tax relief on business sales made to employee ownership trusts will be reduced from 100% to 50%, taking effect November 2025
-
Business rates will be reduced for 750,000 retail, hospitality and leisure properties, which will be funded by an increase on premises worth more than £500,000
-
Reduction in the Capital Gains Tax relief available on qualifying disposals to Employee Ownership Trusts from 100 per cent of the gain to 50 per cent. This will take effect from
Pensions
-
An increase of £440 per year for the basic state pension and an increase of £575 per year for the new state pension
Regional Economic Support
-
“Flexible” funding worth £13bn for seven regional mayors to invest in skills, business support and infrastructure.
The announcement of a new “youth guarantee” programme to be funded by the Government and the funding of apprenticeships will hopefully present opportunities for SMEs to offset rising wage costs through productivity and upskilling.
Economic Outlook: OBR Forecast
Putting the policies into context, the Chancellor praised the OBR’s forecasted increase to UK GDP for this year, which is set to grow by 1.5% in 2025. This is above the 1% that had been expected earlier this year. However, the OBR downgrade the outlook from what they had projected in March. Their forecast now is:
-
the economy is now expected to expand by 1.4% in 2026, which is below a previous forecast of 1.9%
-
GDP is estimated to expand by 1.6% for 2027, against March’s estimate of 1.8%
-
GDP for 2028 is now forecast to rise by 1.5%, where it had originally been forecasted to be 1.7%
-
the economy is set to expand by 1.5% in 2029, not 1.8% as previously forecasted
SMEs must now respond to implementing worker protection rights as part of the Employment Rights Bill in the fiscal context set out in this year’s Autumn statement.
We Are Here to Help
The imminent reforms are far-reaching across the entire employment lifecycle, bringing increased compliance demands and driving a cultural shift in how the employment relationship is managed. With SMEs forming the backbone of the UK economy, the growing complexity of regulatory compliance, combined with a challenging fiscal environment, requires Business Leaders and HR working in partnership to navigate this cultural shift and implement the significant operational changes required.
If you would like to find out how HR Solutions can help your business to start preparing for these changes or if you have any questions about the upcoming changes then please get in contact.
