Autumn Budget 2026: key takeaways for HR and payroll

Today, Chancellor John Healey presented his first Budget, setting out the tax and spending plans for Prime Minister Andy Burnham’s Government.

Healey began his Budget speech by calling it a Budget for the ‘working people of Britain, for British businesses big and small’.

Several measures impacting HR and payroll teams were announced in this Budget.

Below, we’ve summarised the key points and what they mean for your organisation.

Key takeaways

• National Living Wage rises to £13.21 an hour from April 2027.
• The Government will act on pay transparency to close the gender pay gap.
• Self-employed fathers and partners get two weeks of paternity pay.
• 70,000 more small businesses will pay no business rates.
• The 55p mileage rate is now permanent, and the rate above 10,000 miles rises to 35p.
• New laws will limit non-compete clauses.

National Minimum Wage rates from April 2027

The Government has accepted the Low Pay Commission’s recommendations.

From April 2027:

• The National Living Wage (NLW) for over-21s will rise from £12.71 to £13.21 an hour.
• The National Minimum Wage (NMW) for 18 to 20-year-olds will rise from £10.85 to £11.27 an hour.
• The NMW for under 18 and the Apprentice Rate will rise from £8 to £8.31 an hour.

Unlike in Labour’s previous two Budgets, where youth rates increased much faster than the adult rate, both rates go up by the same 3.9% this year.

As a result, the gap between youth and adult rates stays the same.

The change comes as around 981,000 16 to 24-year-olds are not in work, education or training, with employers warning that recent steep rises have made it harder to take on young people.

Dan Grace, Director of International HR Consulting, said: “There is a growing concern amongst the small business owners that I speak to that this continual rise in the minimum wage year on year is increasingly impacting the consumer.

“We’re seeing this impact particularly in the hospitality industry, as the rise in staff costs in this high-headcount industry almost always directly drives an increase in the price of the end product to consumers.

“I don’t believe it will be long before we start seeing a coffee cost £7 due to the current rate of increase, typically because when the minimum wage increases, everyone above that floor also wants a similar rate increase.”

We’ve conducted quite a bit of research on this topic and explored how it impacts pay compression, all of which is covered in our recent guide: UK pay compression 2026 research.

Gender pay gap commitment

Healey stated that he’s ‘heard calls’ for pay transparency on job adverts to close the gender pay gap.

He confirmed that the Government will ‘act soon’ to ensure women are ‘paid and promoted fairly’.

“This Labour Government is determined to make the economy work better for all families,” Healey added.

Grace commented: “This is not a revelation; our colleagues on the continent are already seeing this play out with the recent EU Pay Transparency Directive.

“We in the industry are expecting the UK to broadly follow suit, as is often the case with EU legislation.”

Extending paternity pay

Healey announced that the Government is extending paternity pay to include self-employed fathers and partners who have previously missed out.

The change gives eligible parents two weeks of support currently worth up to £194 a week, so they can spend more time with their child.

Grace said: “A welcome change for self-employed fathers and partners.

“The individuals I’ve spoken to see this as a positive step, although the level of support may not be sufficient to enable them to stop working entirely during the two-week period.

“There is also some concern about whether accessing support of this nature could bring greater HMRC scrutiny, although this appears to be more a perception than an established consequence.”

Threshold increase for small business rate relief

Thousands of businesses will pay no business rates.

Healey said he wants businesses to invest, recruit and expand, and is therefore announcing action to support high-street businesses.

The Budget announced an increase in the threshold for small business rate relief for retail, hospitality and leisure businesses from £12,000 to £18,000.

Simon Jack, Business editor, BBC, commented: “The chancellor said he will cut business rates to zero for 70,000 businesses by raising the threshold for those who have to pay it from premises with a rateable value of £12,000 to £18,000.

“This will be welcomed but it had been frozen since 2017 and would have reached nearly £18,000 if it had risen in line with inflation.”

Grace added: “Excellent news for small businesses, as this should alleviate some cost pressures and hopefully allow for growth.”

Tax-free mileage rates made permanent

In May, the Government raised the Approved Mileage Allowance Payment (AMAP) rate for cars and vans from 45p to 55p a mile for the first 10,000 business miles, backdated to April 2026.

That rate is now permanent, and the rate for business miles over 10,000 will go up from 25p to 35p.

“Good news for those who are on the road a lot, but not an unexpected change,” said Grace.

Non-compete clauses

The Government will legislate to restrict or curb non-compete clauses so they no longer block recruitment for start-ups and scale-ups.

This could be a big change for those hiring, as around five million employees are thought to be covered by a non-compete clause, typically lasting around six months.

“A welcome change for employees, and good for competition; I believe that a lot of employers will still use this tactic even if unenforceable, as typically employees are bad at knowing their own rights in these circumstances,” said Grace.

Employment Rights Act

Last year’s Employment Rights Bill received Royal Assent on 18 December 2025 and is now coming into force in stages.

While not news from the 2026 Budget, it’s worth keeping in mind as the next key dates are quickly approaching:

• 30 October 2026: employers must take ‘all reasonable steps’ to prevent sexual harassment, and new trade union access and recognition rules begin.
• 1 January 2027: the qualifying period for unfair dismissal falls to six months, and the cap on compensation is removed.
• Early 2027: fire-and-rehire restrictions begin, but the official date hasn’t been confirmed yet.

Grace emphasised: “This is THE big piece of employment legislation that every employer needs to be all over.

“The Employment Rights Act is fundamentally changing the employment landscape.”

Preparing your business

Between now and April 2027, HR and payroll teams have a lot to plan for.

Starting early makes it much easier to stay compliant, and IRIS is here to help at every stage.

To find out what today’s announcements mean for your business, register for our Autumn Budget 2026 Explained webinar on 4 November at 12pm.