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For most UK employers, the Autumn Budget did not arrive with a single dramatic headline tax rise. There was no sudden increase in employer National Insurance rates. No overt new payroll levy. No explicit announcement that employment would become permanently more expensive.
And yet, beneath the surface, the structural cost of employing people in the UK has now been quietly reset.
Over the next six years, a combination of policy decisions will steadily and materially increase the cost base of people led businesses. This will happen even if firms do not grow headcount, do not expand internationally and do not materially change their service mix.
For accounting firms and professional services businesses in particular, this matters more than most.
The Autumn Budget has effectively pulled three long term levers at once.
From April 2026, the minimum wage steps up again. While many accounting firms are not minimum wage heavy, the impact does not stop at entry level roles.
Higher wage floors push up junior salaries, which then forces compression pressure through supervisors, managers and team leaders. Pay bands reprice upward to maintain differentials. This cascades quietly across the workforce.
The result is that average salaries rise faster than headline inflation alone would suggest.
Tax and National Insurance thresholds are now frozen until 2031.
This is a classic example of fiscal drag. Each pay rise pushes more income into NIable bands without any change in the rate itself. From an employer perspective, this creates a hidden annual cost increase that compounds over time.
It is a silent tax rise on employment that does not show up in any single Budget headline.
From April 2029, only the first two thousand pounds of pension contributions via salary sacrifice will avoid employer National Insurance. Anything above that will attract NI at 13.8 percent.
For firms with higher pension generosity, particularly at manager and partner level, this introduces a new permanent layer of payroll tax into the cost base.
To understand the practical impact, we recently modelled a typical UK accounting or professional services firm with the following profile:
The position today
What happens by 2031
Now layer in the Budget effects:
By 2031 this produces:
That is an increase of around £660,000 per year on the same team doing the same work, with no headcount growth and no productivity uplift.
This is why we now reference a realistic range of:
£500,000 to £700,000 per year of additional employment cost by 2031 for a typical mid-sized firm.
Senior heavy firms with higher pension contributions can exceed this materially.
Calculate the impact of Autumn Budget on your employment costs
For accounting firms and other people led professional services businesses, employment costs are the dominant driver of margin.
This cost reset creates pressure in only a small number of places:
At the same time, staff net take home pay will continue to feel pressure from fiscal drag, creating rising pay expectations even as firm level profitability tightens.
This combination is what makes the next five years structurally different to the last five.
One of the biggest risks we see is firms treating this as a future problem.
Pension changes feel distant. Threshold freezes feel gradual. Minimum wage changes are being absorbed in annual increments.
But these costs compound. By the time many firms turn their attention fully to the issue in 2028 or 2029, their cost base has already structurally shifted upward.
This is why many forward looking firms are acting now.
Not in panic. Not with cost cutting. But with rearrangement.
The most successful responses we see are not about reducing headcount. They are about redesigning where and how work is delivered.
Firms are now:
This is not about offshoring for its own sake. It is about protecting EBITDA while still investing in service quality and people.
The Autumn Budget has already set the cost curve for the rest of this decade.
The strategic question is no longer whether employment will become more expensive. It will.
The question is whether your firm chooses to absorb that pressure passively or redesigns its delivery model to stay in control of margins, capacity and growth.
For many firms, budget planning for the new year is happening right now. What matters is not whether 2025 feels tight. What matters is whether your medium term model still works in a world where the same team costs £660,000 more per year by the end of the decade.
Clarity now is cheaper than correction later.
If you would like to see what this looks like for your own firm under the Autumn Budget rules, applying your real numbers rather than typical assumptions, that is exactly the exercise we are running with leadership teams across the UK right now.
Book a call with our expert now.
Namrata is an Accounting and Learning & Development professional with over 10 years of experience in the outsourcing industry, specialising in UK bookkeeping, VAT, final accounts, and taxation. She is proficient in a wide range of accounting software, ensuring accurate and efficient financial solutions. With nearly 2 years of hands-on experience in Learning & Development, she also contributes to employee training, skill enhancement, and process improvement strategies aligned with organisational goals.
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