Here’s how Rachel Reeves’ second budget will affect personal and payroll matters (assuming that it all comes into being):

Headline announcements

1. Taxation & wages for salaried people.

The rates of income tax and National Insurance Contributions (NIC) for employees will remain the same as promised.

The income tax band thresholds will now be frozen until 2031 which will mean that over time more people will start paying tax or pay at a higher band as wages rise.

The VAT rate will remain at 20%.

There is a change to the Cash ISA limit coming in April 2027. Then the amount allowed will be capped at £12,000 with the rest of the £20,000 annual allowance being reserved for investment ISAs. This is for people 65 and under. Over 65s retain the full £20,000.

The BBC has further details here.

Dividend income tax rates will also rise in April 2026. The ordinary rate will rise from 8.75% to 10.75%, and the upper rate from 33.75% to 35.75%. The additional rate will remain unchanged at 39.35%. Details from HMRC here.

• Taxation & wages for the self-employed.

There have been no changes to NIC contributions for the self-employed this year.

• Business taxes

There were no changes to Employers NIC announced.

The Employer’s Allowance (EA) will stay at £10,500 with all eligible companies getting the EA.

There is currently no mention if sole director limited companies will again be allowed to claim the EA (currently they are not eligible).

Training for apprentices under-25 free at small companies

A new Youth Guarantee will give £820m towards efforts to guarantee every young person a place in college, an apprenticeship or personalised job support.

After 18 months, 18-to-21 year-olds will be offered paid work instead of benefits.

• Minimum wage

There is good news for those on the National Living Wage which will increase from £12.21 per hour to £12.71 per hour for those aged 21 and over from April.

The rate for 18 – 20 year olds will rise from £10.00 to £10.85 at the same time.

For 16 and 17 year olds, it will rise to £8.00 an hour, up from £7.55.

• Cars & Fuel

Electric car drivers will be subject to a 3p charge for every mile they drive from April 2028. Plug-in hybrid vehicles will be charged 1.5p per-mile. It is unclear how the mileage will be calculated.

The 5p temporary cut in fuel duty remains until at least April.

• The Workplace & State Pensions

The basic and new state pension will increase by 4.8% next year. This is above the current rate of inflation and is part of the ‘Triple Lock’.

There are changes to Salary Sacrifice Pensions from 2029. The amount people can “sacrifice” from their salary while avoiding NIC on pension contributions will be capped at £2,000. Contributions above this will be subject to NIC. This will affect higher earners.  Further details from the BBC here.

• Other measures

The two child benefit cap will be scrapped from April 2026. This should help lift children out of poverty.

A change to inheritance tax will allow the transfer of 100% relief allowance between spouses on agricultural property. This would mean that a farmer could pass on £2m of farmland (plus the farmhouse) to their children without paying IHT.

Detailed thresholds for Tax year 2026 – 27?

These have not yet been published by HMRC but are likely to be the same as this year.

1. Tax thresholds

The Personal Allowance remains at £12,570 per annum, meaning that no tax is paid on wages up to this figure, £1,048 per month or £242 per week.

There are three tax bands for earnings above £12,570:

Basic Rate                 20% on £1 – £37,700 (i.e. for total earnings £12,571 – £37,700)

Higher Rate               40% on £37,701 – £125,140 and

Additional Rate         45% on £125,141 and above.

• New tax codes

The codes remain the same as the previous tax year.

• National Insurance

The Class 1 National Insurance rate remains the same.

The lower earnings limit (LEL) is the point at which you can claim qualifying years for the state pension but NI rate is 0%. For 2025 – 26 it is £6,500 per year. If you employ someone and pay them this amount or more you have to register for PAYE.

The Primary Threshold is where the employee starts paying NI and the Secondary Threshold is where the employer starts paying NI.

The bands are:

Threshold	Pay per week	Pay per month	Pay per annum	Rate (category letter A)
Lower earnings limit (LEL)	£125	£541	£6,500	0%
Primary Threshold (PT)	£242	£1,048	£12,570	12%
Secondary Threshold (ST)	£96	£416	£5,000	12%
Upper Secondary Threshold (under 21) (UST)	£967	£4,189	£50,270	2%
Apprentice UST (AUST)	£967	£4,189	£50,270	2%
Upper Earnings Limit (UEL)	£967	£4,189	£50,270	2%

Employers National Insurance (for category letter A) is 0.00% for earnings at or above LEL up and including ST.

For earnings above ST up to and including UEL/ UST/ AUST, it is 13.80%

The Employers National Insurance Allowance remains at £10,500 per year. You are only eligible if your total Class 1 NICs liability is below £100,000 in the tax year before the year of claim. It will also start to operate as de minimis state aid.

HMRC have further details here.

•  National Minimum Wage

The national minimum wage goes up on 1^st April:

Year	21 and over		18 to 20	Under 18	Apprentice
April 2025 (current rate)	£12.21		£10.00	£7.55	£7.55
April 2026	£12.71		£10.85	£8.00	£8.00
Increase	4.1%		8.5%	6.0%	6.0%

Almost all workers are entitled to it by law.

•  The Workplace Pension

The contribution rates for both employers and employees remain the same. There are currently no plans for future increases.

Auto-enrolment occurs when a worker is between 22 and State Pension age and earns at least £10,00 per year.

The employer’s contribution is 3.0% and

The employee’s contribution is 5.0%.

This gives a minimum total of 8.0%. However, should the employer pay more, say 4.0% then the employee, should they wish, could pay less, say 4.0% and still maintain the 8.0% minimum. Both employer and employee can pay more than the minimum.

• Statutory Sick Pay (SSP)

This was not mentioned and currently remains at £116.75 per week. The first 3 days of any sick leave remain as ‘qualifying days’.

Hopefully this has been of use as a checklist of things to do. It is not comprehensive and you should check on maternity & paternity pay, student loans, etc. as appropriate.