Chancellor unveils tax rises in Budget

Chancellor unveils tax rises in Budget

26 November 2025

The Chancellor, Rachel Reeves, has delivered her second Budget to Parliament setting out the Government’s
tax and spending plans, which followed an early release in error by the Office for Budget Responsibility
(OBR) of its analysis.  Below we summarise the main points from the Chancellor’s speech for employers.

Wages

As was announced the day before the Budget, the National Living Wage (NLW) (paid to those 21 and over)
will increase by 4.1% to £12.71 from 1 April 2026, with 6% rises in the 16–17-year-old and apprentice rates,
both going up to £8. For a full-time worker (working 40 hours per week) earning the NLW this will mean a
pay increase of over £1000 per year. Meanwhile, 18–20-year-olds will see their pay increase to £10.85, an
8.5% increase.

Income tax and National Insurance
Income tax thresholds will be frozen for a further three years until the end of the 2030/31 financial year,
which is longer than expected and will mean tax rises with more people being brought into paying income
tax.  No increases were announced in National Insurance contributions or VAT.

Business rates
Over 750,000 retail, hospitality and leisure properties will benefit from lower tax rates, funded by higher
rates on properties worth £500,000 or more, such as warehouses used by online retail giants.

Apprenticeships
Funding will be provided to make training for under 25 apprenticeships free for small and medium
enterprises. The Government will also provide £820 million over the next three years to fund the “youth
guarantee” scheme. Under the scheme, 18–21-year-olds will be offered paid work after 18 months.

Salary sacrifice
A £2000 cap will be introduced on salary sacrifice payments into pensions with contributions above that
taxed in the same way as other employee pension contributions. The cap will be introduced in 2029 to give
employees and employers time to prepare for the change.

Electric vehicles

A new car tax will be introduced on electric vehicles (EVs) from April 2028, charged at 3p per mile for EVs
and 1.5p per mile for plug-in hybrids.

Benefits
The two-child benefit cap will be removed from April 2026, aimed at reducing child poverty and helping
families struggling with the cost of living.

Source URL: https://app.croneri.co.uk/whats-new/chancellor-unveils-tax-rises-budget