Autumn Budget 2025: What UK Recruitment Firms Need to Know

The Autumn Budget sets the tone for how UK recruitment firms hire, bill, manage compliance, and plan for growth in the coming financial year. With rising operating costs, evolving payroll rules, IR35 pressure, and sector-wide talent shortages, even a small policy change can reshape how agencies work.

This article gives you a one-stop, recruiter-focused breakdown of every Budget announcement that affects hiring, margins, demand, compliance, and contractor pay.

Key Points at a Glance

1. Income tax and National Insurance thresholds frozen until 2031
2. Pension salary-sacrifice relief capped at £2,000 from 2029
3. National Minimum Wage to rise again in April 2026
4. Business rates permanently reduced for retail, hospitality and leisure
5. Dividend, savings and property income tax increased by 2 percentage points
6. £820m allocated for youth employment, training and apprenticeships
7. Mileage-based tax for electric and hybrid vehicles from 2028
8. Universal credit two-child limit removed
9. Rail fares in England frozen for 2026

Key Takeaways From the UK Autumn Budget 2025

1. Freeze on Income Tax & National Insurance Thresholds Until 2031

One of the most notable Budget decisions is the extension of the freeze on income tax and National Insurance thresholds until 2031. This means the bands at which people begin paying tax will stay the same for several more years. As salaries rise over time, more people move into higher tax bands. This reduces take-home pay for candidates and often leads to rising salary expectations.

What does it mean for recruitment firms?

Recruitment firms may see increased pressure from candidates seeking higher wages and from clients questioning why pay rates are rising. Plus, more workers drift into higher tax bands over time, reducing net pay and increasing overall payroll tax burden across temporary and permanent hiring.
For temp agencies, this long-term freeze will influence rate card updates and on-cost calculations. Permanent recruiters may experience more complex salary negotiations as candidates look to offset reduced net income.

2. Pension Salary-Sacrifice Relief Capped at £2,000 from 2029

The government will limit the amount employees can sacrifice from their salary into pensions without paying National Insurance. From 2029, anything above £2,000 a year will attract NIC.

What does it mean for recruitment firms?

This change affects senior-level candidates, high-earning contractors and certain umbrella arrangements. Recruiters working in professional sectors, such as IT, finance, engineering and interim markets may face new questions about remuneration structures. Many candidates may shift their focus to higher base salaries, changing how compensation packages are negotiated.
Agencies must also ensure their contractor payroll and umbrella partners remain aligned with new compliance requirements.

3. National Minimum Wage Rise in April 2026

The legal minimum wage for over-21s will rise from £12.21 to £12.71. Wages for 18–20-year-olds will increase from £10 to £10.85, part of a long-term plan to introduce a single adult rate.

What does it mean for recruitment firms?

This increase will have a direct impact on industries that rely heavily on temporary labour, such as warehousing, logistics, hospitality, retail, care and manufacturing. Recruitment firms will need to update charge rates, recalculate margins and prepare clients for increased staffing costs. This may also intensify competition for entry-level labour.

4. Permanent Business Rates Cuts for Retail, Hospitality & Leisure

More than 750,000 retail, hospitality and leisure businesses will benefit from permanently reduced business rates. These sectors typically generate high seasonal and temporary staffing demand.

What does it mean for recruitment firms?

Lower costs for employers may support increased hiring activity, larger workforce requirements during busy periods and more stable temp volumes throughout the year. For agencies specialising in these markets, this is a positive development after several challenging years.

5. Tax Increases on Dividends, Property Income & Savings

The Budget introduces a 2 percentage point rise in tax on dividend income, property income and savings income. This affects contractors operating through limited companies, property professionals and high-earning workers.

What does it mean for recruitment firms?

Although this is not a direct employment reform, it may influence contractor take-home pay and prompt some workers to reconsider whether to operate through PSC, umbrella or PAYE models. Recruiters with contractor-heavy desks should be prepared to support these conversations.

5. £820m Youth Guarantee Funding

The government is investing £820 million over three years to expand training, apprenticeships and employment support for 18–21-year-olds. This initiative strengthens the early-career talent pipeline and may ease workforce shortages in sectors such as retail, care, administration, warehousing and customer service.

What does it mean for recruitment firms?

Recruitment firms can use this opportunity to build new youth-focused sourcing strategies, apprenticeship hiring solutions and hire-train-deploy models to support clients who struggle with junior hiring.

6. New Mileage-Based EV Tax from 2028

A mileage charge will be introduced for electric and hybrid vehicles — 3p per mile for electric cars and 1.5p per mile for hybrids. This affects workers who drive regularly for their roles, including those in care, field engineering, home visits, inspections, community services and sales.

What does it mean for recruitment firms?

Recruitment firms may see increased requests for mileage allowances or more interest in roles that require less travel. These changes may also influence how employers design mobile or field-based positions.

7. From April 2026, the two-child cap on Universal Credit will be lifted

Families will receive the child element for every child, regardless of family size. This change is expected to benefit around 560,000 families and could increase the average support by approximately £5,310 per year. By 2029 to 2030, it is estimated to help reduce child poverty for around 450,000 children.

What does it mean for recruitment firms?

Greater financial security for working parents may improve labour market participation among those who rely on flexible or shift-based work. Sectors such as retail, logistics, hospitality and care may see a broader candidate pool, stronger attendance and higher shift uptake as families face fewer financial barriers to working.

8. Rail Fare Freeze in 2026

Regulated rail fares in England will be frozen next year. This is helpful for temporary and lower-wage workers who depend on public transport, potentially improving mobility, attendance and shift uptake.

What does it mean for recruitment firms?

Recruitment agencies covering industrial, healthcare, hospitality and education sectors may see fewer barriers to commuting.

What Recruitment Firms Should Do Next?

The Autumn Budget 2025 presents a mix of rising employment costs and new opportunities for expanding workforce supply. To adapt, agencies should:

• Review and update rate cards to reflect wage and tax changes
• Strengthen guidance for candidates on take-home pay and payroll changes
• Support clients in workforce planning using updated cost-of-employment models
• Reinforce umbrella and contractor compliance ahead of the pension cap
• Build youth-focused hiring programs in response to new funding
• Prepare for growth in hospitality, retail and leisure hiring as business-rate cuts take effect
• Protect margins by updating gross-profit models to account for rising payroll on-costs
• Improve billing speed and cashflow visibility as payroll costs rise before client rate uplift

These steps will help agencies maintain profitability and continue delivering value to clients during a period of shifting labour-market conditions.

How QX Global Group Supports Recruitment Firms Through Change

Budget changes often bring new challenges for staffing companies, higher wage floors, shifting pay structures, and evolving sector demands. QX Global Group helps recruitment firms navigate these transitions with:

• Scalable offshore recruitment teams
• Expert payroll, compliance and contractor support
• Automation-enabled delivery models
• Specialist temp and permanent hiring support
• Cost modelling and market insights
• Enhanced billing efficiency and cashflow control to offset rising payroll costs

As the labour market adjusts to the Autumn Budget 2025, partnering with QX gives agencies the operational stability, cost efficiency and flexibility they need to succeed in a changing environment.

Originally published Nov 27, 2025 11:11:07, updated Dec 01 2025

Topics: Autumn Budget 2025, Autumn Budget for Recruitment Firms