UK Autumn Budget 2025 – Employment Tax

The key employment tax related announcements are as follows:

• NICs relief in respect of pension contributions effected pursuant to salary sacrifice arrangements restricted to GBP2,000 of contributions – the National Insurance contributions (NICs) relief (in respect of employee and employer contributions) for employee pension contributions made pursuant to salary sacrifice arrangements will be limited to GBP2,000 of contributions per employee with effect from April 2029. Pension contributions via salary sacrifice in excess of this amount will be subject to employee and employer NICs contributions as for ordinary employee pension contributions. Income tax exemption for relevant pension contributions will be preserved and ordinary employer pension contributions will remain exempt from NICs.
  
  
• Umbrella company joint and several liability legislation – the legislation which renders agencies (and where there is direct engagement with the umbrella company, the end-client) jointly and severally liable for any PAYE liabilities of non-compliant umbrella companies, which was published in draft in July 2025, will be included in the Finance Bill 2025-26 and take effect from 6 April 2026.
  
  
• Expansion of EMI scheme – a substantive expansion of the current scope of the Enterprise Management Incentives (EMI) company eligibility, with the objective of facilitating access to talent support for scaling companies by virtue of including options arrangements as an integral part of overall remuneration. The proposed changes, to take effect from 6 April 2026, include increasing the employee limit and company share option limit to 500 and GBP6 million respectively and an increase to the gross assets test to GBP120 million (from the existing GBP30 million). In addition, the maximum holding period will be increased to 15 years with such change apply to existing as well as new EMI options.
  
  
• Alignment of the Globally Mobile Employee (GME) notification procedure with Overseas Workday Relief limits – where an employer submits a GME notification in respect of a qualifying new resident employee that will be eligible to claims Overseas Workday Relief, the in-year provisional relief afforded by the notification will be limited to no more than 30% of the employee's income (aligning with the financial limits on the amount of OWR which can be claimed).
  
  
• Changes to workplace benefits and treatment of homeworking expenses – with effect from 6 April 2026 the reimbursement of expenses for eye tests and home working equipment will be exempt (aligning with the existing exemption in respect of direct provision) and the direct provision or reimbursement in respect to flu vaccines will also be exempt. In addition, with effect from 6 April 2026 deductions from earnings for additional household expenses incurred while being required to work from home (where not reimbursed by an employer) will be disallowed to counter perceived abuse.  

Initial Thoughts

The major employment tax announcement relating to restriction of National Insurance contributions (NICs) relief in respect of pension contributions effected pursuant to salary sacrifice arrangements will in principle have a substantive adverse effect for employees and employers due to the relatively low quantum of the permitted NICs relief for such arrangement compounded by the prevalence of adoption of salary sacrifice arrangements by employers. However, the fact that the announced change will not be implemented until April 2029 renders the proposed change subject to intervening political vicissitudes with it being difficult to say with any degree of certainty whether the proposed change will ultimately be implemented.

Disregarding the likelihood of the measure surviving politically, the extended implementation date of April 2029 will at least afford employers ample opportunity to review the economics of their salary sacrifice arrangements (including addressing the loss of employer NICs savings and effect on calculation on contributions where the benefit of such saving has historically been wholly or partly shared with employees) to determine whether such arrangements are commercially viable going forwards and to implement any necessary contractual changes.

Should you have any queries on the UK Autumn Budget, please reach out to your usual UK tax contact or the following: