Marvin OnumonuChancellor Rachel Reeves unveiled a series of reforms in the Autumn Budget 2025, with a focus on supporting young people, pensioners, employers, and the wider UK workforce.
Leading up to the Budget, Reeves said she would make “fair and necessary” choices, balancing economic growth with fiscal responsibility.
Labour pledged not to raise income tax, National Insurance (NI), or VAT for “working people” in its 2024 manifesto.
In the Autumn Budget 2025, Reeves left rates for income tax, NI, and VAT unchanged for working people, while introducing targeted tax increases elsewhere.
As part of the changes revealed in the fiscal statement, Reeves announced a guarantee for young people, ensuring every individual will be offered a place in college, an apprenticeship, or personalised job support, with those aged 18 to 21 eligible to claim paid work benefits after 18 months on these programmes.
This initiative aims to close gaps in education and employment, providing employers with a larger pool of skilled and work-ready young candidates and helping to address labour shortages in key sectors.
Changes to Employee Car Ownership Schemes (ECOS), which would have reclassified ECOS vehicles for tax purposes, have been delayed, offering employers and employees continued clarity and stability for now.
The Investment Reserve Fund of the British Coal Staff Superannuation Scheme will be transferred directly to scheme members, allowing them to receive the full benefit of the fund.
Additionally, pensions accrued before 1997 in the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS) will now be indexed for inflation, increasing annual payouts and offering greater long-term financial security for affected pensioners.
Overseas access to voluntary Class 2 National Insurance contributions (NICs) will be abolished, preventing individuals living abroad from using the scheme to build UK state pension entitlement.
This measure is intended to protect taxpayers and ensure the residency requirement for state pension benefits is robust, reducing costs to UK public finances.
The Chancellor also outlined new measures to crack down on illegal working, including the introduction of a digital ID system and enhanced enforcement by HMRC and the Fair Work Agency.
This will mean stricter compliance requirements for employers, particularly in sectors reliant on gig workers or flexible labour, and aims to ensure a fairer playing field by reducing exploitation and illegal employment practices.
Capital gains tax (CGT) relief on sales to employee ownership trusts (EOTs) will be cut from 100% to 50% from November 2025, which is expected to raise £0.9bn a year from 2027–28.
For business owners, this means higher tax costs when transferring ownership to employees, which could impact succession planning and sale valuations, though employee ownership remains an attractive option for sustaining company culture and jobs.
From April 2029, salary-sacrificed pension contributions above £2,000 annually will no longer be exempt from NICs, affecting both employees and employers.
Employers who use salary sacrifice as a tool for staff retention and reward may need to review their reward strategies, as the change reduces the tax efficiency of higher pension contributions via salary sacrifice.
Finally, the freeze on personal tax and NICs thresholds will be extended for a further three years from 2028, projected to increase Government receipts by £14.9bn in 2029–30.
This will gradually pull more individuals into higher tax brackets and increase National Insurance costs for both workers and businesses over time.
The Chancellor said these reforms are designed to create fairer opportunities for young people, safeguard pensioners’ incomes, and ensure businesses operate on a level playing field, all while supporting a sustainable future for the UK workforce and economy.
