Yesterday the Chancellor of the Exchequer, Rachel Reeves, delivered the Government’s Autumn Budget, setting out the fiscal and economic roadmap for the years ahead.
We looked at what we believe might most affect our members:
- Income tax thresholds have been frozen until the end of the 2030/31 financial year - essentially pushing more people into higher tax brackets with wage increases meant to cover inflation. This in turn indirectly impacts employers to increase gross wages. Hence why its known as a stealth tax - not a direct tax increase but indirectly affects both employees and employers.
- Salary-sacrificed pension contributions to be capped at £2000 from Apr 2029 (contributions above will be subject to employer & employee NIC) - meaning future direct payroll increases and complexity for employer's benefit schemes
- Office for Budget Responsibility (OBR) predicting inflation to rise higher than initial predictions (3.5% instead of 3.2%)
- Minimum wage for employees to increase to £12.71 an hour for over 21s from April 2026 and to £10.85 for 18 - 21s
- Tax on dividends to increase by 2%
On the more positive side for our sector:
- Increase to the overall Apprenticeship Budget
- The replacement of the current Apprenticeship Levy with the Growth and Skills Levy (GSL), which will come into effect from April 2026 - with a priority shift for funding away from Level 7 and on to level 2 & 3 qualifications, vital to our sector.
- The long-term plan for Business Rates Reform, which is intended to rebalance the tax burden to benefit high street businesses, including salons
Lesley Blair MBE, CEO of BABTAC “For small businesses continuing to navigate the current financial climate, the decision to freeze income-tax thresholds until the end of 2030/31 offers some certainty for planning and forecasting but will ultimately cost employers more. The freeze on National Insurance thresholds will effectively also increase employer contributions as wages rise with inflation, adding further pressure on already tight margins. Several other measures announced in the Budget are likely to place additional strain on both employers and employees. The move to tax salary-sacrificed pension contributions removes a valuable incentive for staff savings and adds another cost consideration for employers. With the OBR forecasting inflation to rise higher than expected, beauty businesses may feel the squeeze on operating costs, while customers themselves face shrinking disposable income. The scheduled increase in minimum wage to £12.71 for over-21s from April 2026, although positive for workers, will significantly raise wage bills in a labour-intensive sector. Coupled with a 2% rise in tax on dividends, a change that will particularly affect owner-operators who pay themselves this way, the cumulative impact could challenge the commercial viability of many small salons, potentially leading to price increases or reduced staffing.
While we acknowledge some positives, particularly with regards to Apprenticeships and Business Rates reform we are concerned that the overall impact of the budget on our industry brings many challenges. We will continue to engage with The Department of Business & Trade (BEIS) in order to best support our members and sector"