PIXIE PAYROLL Blog

The Chancellor’s Autumn Budget 2025 has landed and with it comes a range of changes, that will directly affect payroll, HR and finance teams across the UK. Here at Pixie Payroll, we’ve broken down the key announcements and explained what they mean for your business and employees.

Key Payroll-Related Announcements

The minimum wage, real living wage and apprenticeship wage are increasing. National insurance and income tax thresholds are frozen, the state pension rate is increasing and Cash ISA limit is reduced.

• Minimum Wage Increases (April 2026)
  • Over 21s: rising to £12.71 per hour (up 50p)
  • Ages 18–20: increasing to £10.85 per hour (up 85p)
  • Under 18s and apprentices: moving to £8 per hour (up 45p)
• Real Living Wage Increase (May 2026)
• Employers paying the Real Living Wage will need to increase pay to £13.45 per hour for employees outside London (an 85p rise)
• National Insurance and Income Tax Thresholds Frozen
  • Thresholds will remain unchanged until April 2031, meaning more employees could drift into higher tax bands as wages rise.
• Dividend Tax Increase
  • SME owners and directors will see dividend tax rates rise by 2 percentage pointsfrom next year. From April 2027, the property basic rate will be 22 per cent and the property higher rate will be 42 per cent.
• State Pension and Benefits
  • The State Pension will rise by 4.8% in April 2026.
  • Salary Sacrifice – A £2,000-a-year cap on the amount that can be put into pensions will be in place from April 2029. More can be put in, but it will be taxed.
  • The two-child benefit cap has been scrapped, which may affect payroll teams managing salary sacrifice childcare schemes.
  • Some benefits, such as personal independence payment, attendance allowance and disability living allowance, as well as carer’s allowance will rise by 3.8% in April.
• Cash ISA Limit Cut
  • A restriction on the amount of tax free savings will be reduced from £20,000 to £12,000, with a push on encouraging more investment in shares rather than cash savings.

How this could impact employers

• Budgeting for wage rises: Payroll teams should prepare for higher wage costs from April 2026.
• Tax Planning: Frozen thresholds mean employees may face “fiscal drag,” where pay rises push them into higher tax brackets. Clear communication will help staff understand why their take-home pay may feel different.
• SME Considerations: Dividend tax rises could impact directors who rely on dividends for income. Payroll and finance teams should factor this into remuneration planning.
• Employee Support: With pensions and benefits changing, payroll teams can play a vital role in guiding employees through adjustments, offering resources or signposting financial wellbeing support.

And in Cornish budget related news, this ones an exciting one: The autumn budget announced £30-million of new funding for Cornwall to invest in its critical minerals, renewable energy and marine innovation. The fund divulged to Cornwall Council and to replace the Shared Prosperity Fund, will be able to invest in growth-driving interventions to support the county’s local infrastructure, research and development and supply chain development.

Alongside these Payroll related updates, there are other changes including a freeze on rail fare increase and a road tax on EV vehicles. The autumn budget 2025 brings both challenges and opportunities.

Here’s some handy tips to help you prepare for the changes ahead of April 2026:

• Update Payroll systems early: Ensure your software is ready for the April 2026 minimum/real living wage changes.
• Communicate clearly: Share updates with employees in advance – especially around tax thresholds and wage increases.
• Review contracts and budgets: Factor in wage rises when planning staffing costs for the next financial year.

Feeling overwhelmed by them all? We’re here to help, contact us at Pixie Payroll if you have any queries on these changes or need any Payroll assisted services.

As 2025 winds down and the mince pies start appearing, HR and payroll leaders are gearing up for something a little less festive but absolutely vital: budgeting for 2026. But don’t worry—this isn’t just about crunching numbers. It’s about crafting a smart, flexible plan that helps your business thrive in the year ahead.

The Big Picture: Economy, Regulations and Reality Checks

The UK’s economic growth is predicted to be a modest 0.9% next year, now is the time for scenario planning, not guesswork. Think chess, not checkers.

Watch this space for further news beyond the autumn budget next month. 

Salaries: Steady as She Goes (But Still Growing)

Salary increases are calming down a bit—Payscale says average base pay bumps will hover around 3.5%, and Mercer’s got merit increases pegged at 3.3%.

So while the pay curve is flattening, payroll teams still need to budget for growth, surprise raises, and cost-of-living tweaks. Flexibility is your friend here.

Rethinking the Workforce: It’s Not Just About Headcount

With minimum wage hikes, pension reform, and tax changes looming, the cost per employee is going up.

So instead of asking “How many people?”, ask “What kind of people?” Focus on essential roles, retention strategies, and a smart mix of full-time, freelance, and outsourced talent.

Tech Time: From Expense to Advantage

Smart teams are setting aside 10–15% of their budget for digital transformation. Why? Because tech doesn’t just save time – it boosts accuracy, agility, and governance. It’s like giving your payroll team a superpower cape.

Flexibility Is the New Forecast

The best budgets for 2026 will be adaptable. That means building multiple models (conservative, moderate, growth-focused), factoring in tax changes and inflation and keeping a contingency fund (5–7% of your budget) for curveballs.

And don’t go it alone – bring HR, finance and ops together to build a budget that’s collaborative, strategic, and measurable.

Grab that coffee, rally your team and start building a budget that’s ready for anything 2026 throws your way. If you have any payroll queries, just drop me an email – info@pixiepayroll.co.uk

Did you know National Payroll Week was launched by the Chartered Institute of Payroll Professionals (CIPP) back in 1998? It’s all about recognising the unsung heroes who keep the UK paid, compliant and running smoothly.

As the week wraps up, I thought it’d be a great time to share how I can make payroll one less thing for you to worry about.

What I offer
Whether you’re a small business, a growing team or just hiring your first employee, I provide a friendly, efficient service that takes care of:

• Payroll processing for each pay period
• Auto-enrolment calculations and pension submissions
• Timely reporting to HMRC and your pension provider
• No setup fees and low ongoing costs—outsourcing might be more affordable than you think!

Based in Cornwall, I’ve worked with plenty of local businesses but thanks to remote working, I can support you wherever you’re based.

Here’s how I help simplify payroll:

• Add or remove employees (P45s)
• Process payroll on your schedule
• Optional automated payments via BrightPay & Modulr
• Submit real-time info to HMRC
• Create and send payslips
• Generate year-end P60s

Just hiring your first employee?
I can set up your payroll scheme quickly and manage it from day one.

Quick tip:
Auto-enrolment isn’t optional—it’s a legal requirement and missing it can lead to hefty fines. I’ll help you stay compliant by:

• Assessing employees under auto-enrolment rules
• Preparing letters and documents for staff
• Advising on what’s needed to stay on track
• Submitting pension statements alongside payroll
• Keeping everything aligned with regulations

Want to have a chat and find out if I can help your business? Drop us a message (insert details) for a no obligation meeting.

The UK’s state pension plays a vital role in supporting millions of retirees but its rising costs have been sparking debate recently. Let’s break down what the state pension is, how much it’s worth, and why the “triple lock” guarantee is under scrutiny.

What Is the State Pension?

The state pension is a regular payment from the UK government to individuals who have reached state pension age and have made enough National Insurance (NI) contributions throughout their working lives.

As of April 2025, the weekly rates are:

• £230.25 for the full new flat-rate pension (for those retiring after April 2016)
  That’s an annual increase of £472
• £176.45 for the full old basic state pension (for those retiring before April 2016)
  That’s an annual increase of £363

To receive the full amount, you usually need 35 years of qualifying NI contributions. If you have gaps perhaps due to time abroad or care giving you can make voluntary payments but only for up to six previous years (as of April 6).

What Is the ‘Triple Lock’?

The triple lock was introduced in 2010 to ensure pensions keep pace with the cost of living. Under this system, the state pension rises every April by whichever is the highest of:

• Inflation (based on Consumer Prices Index from the previous September)
• Average UK wage growth (from May to June of the prior year)
• A flat 2.5% increase

In April 2025, this meant a 4.1% pension rise.

Is the Triple Lock Sustainable?

• The annual cost is expected to reach £15.5bn by 2030
• The overall state pension spend is around £138bn—about half of total government benefit expenditures

As a result, think tanks like the Institute for Fiscal Studies have proposed scrapping the triple lock as part of broader pension reforms.

Who Can Get the State Pension?

Currently, over 12 million people receive state pension payments. Age eligibility depends on birth year:
6 Oct 1954 – 5 Apr 1960 – 66 | On/after 5 Apr 1960 – gradual rise to 67 | On/after 5 Apr 1977 – expected rise to 68 by 2046, possibly 71 by 2050.

What Is Pension Credit?

Pension credit is an income top-up for retirees with lower earnings. It also rose by 4.1% in April 2025:

– £227.10/week if you’re single

– £346.60/week if you’re a couple

Even if your income is higher, you might still qualify – especially if you have a disability or are a carer. Pension credit may unlock access to:

• Housing benefit
• Council tax reduction
• Help with heating costs
• Warm Home Discount Scheme