The Autumn Budget Changes Small Employers Need to Plan for in 2027

On 28 October 2026, the UK Government unveiled its Autumn Budget, bringing with it a raft of changes that will impact employers and jobseekers alike. Between a higher National Living Wage rate, cheaper overseas hiring and a cut to a key relief for owners, there’s a lot for small businesses to weigh up. 

Here’s what’s changing for SMEs, starting with the cost of employing staff. 

No changes for National Insurance, but minimum wages will increase

The Government has kept its commitment that there will be no increase to the headline rates of National Insurance contributions, income tax or VAT. After the employer National Insurance increases of recent years, which pushed the cost of employing someone up sharply, the absence of a further rise will be genuinely welcome.

However, the Government also announced that from 1 April 2027, the National Living Wage will rise by 3.9% to £13.21 per hour, with the rate for 18 to 20-year-olds up to £11.27 and the rate for 16 to 17-year-olds and apprentices up to £8.31. For a full-time worker on the National Living Wage, that is roughly £910 more in gross annual pay, and the increase will benefit around 2.3 million workers. These are all additional costs that will fall on employers.

Other changes that impact employers

Beyond the changes to minimum wages, a number of other measures will impact SMEs in their arrangements for employing staff.

For any SME that sponsors overseas talent, there are some small wins. From 28 October 2026, an employer’s payment of the Immigration Skills Charge or a Certificate of Sponsorship fee will no longer be treated as a taxable benefit in kind. It removes a tax penalty on hiring employees that businesses cannot always find at home.

Under the existing rules, when an employer sponsors an overseas worker, it must pay the higher of a general salary threshold or the “going rate” set for that occupation (currently, the going rate is fixed at the median wage for the job). From spring 2027, the benchmark will be lower, falling to the 25th percentile of wages, meaning the minimum salary an employer must offer to sponsor a worker will drop for many roles, thus making it easier for SMEs to hire from abroad.

There is also continued support for taking on younger workers. The Budget confirms funding for the £3,000 Youth Jobs Grant and the £2,000 apprenticeship hiring payment for non-levy paying employers in England (typically SMEs), both first announced in Spring 2026. Newly announced at this Budget is £100 million to expand local apprenticeship services. Used well, these are a genuine offset against the rising cost of entry-level roles.

Wider youth employment reforms await the Government’s response to the Milburn review, with a White Paper due early in 2027.

Beyond the payroll: other changes for SMEs

Rates relief: From April 2027, Small Business Rates Relief thresholds for retail, hospitality and leisure properties in England rise to £18,000 for full relief and £21,000 for tapered relief, taking around 70,000 businesses out of rates altogether, with a two-year real-terms freeze for qualifying properties and an extra 20 percentage points of relief for pubs, music venues and social clubs.

Driving for work: Businesses whose staff drive their own vehicles for work can now reimburse them at a permanently higher tax-free rate of 55p per mile for the first 10,000 business miles, with the rate above that rising from 25p to 35p from 6 April 2027.

Founders and business owners: A new Founders’ Relief from 6 April 2027 offers a 10% Capital Gains Tax rate on up to £10 million of lifetime gains for founders of qualifying high-growth companies. However, for most SME owners the bigger change is that the lifetime limit for Business Asset Disposal Relief halves from £1 million to £500,000 from the same date, so anyone planning an exit should take advice early.

Investment and finance: The first-year allowance for main rate plant and machinery rises to 50% from 1 January 2027, while the writing-down allowance falls to 12% from April 2027. The British Business Bank will also expand its Growth Guarantee Scheme to support £6.5 billion of additional SME lending.

Sole traders and side businesses: The Trading Allowance for individuals triples from £1,000 to £3,000 from 6 April 2027.

Tax admin: VAT e-invoicing becomes mandatory from 1 April 2029, and taxpayers joining Making Tax Digital for Income Tax in April 2027 will get a 12-month grace period on late-submission penalties.

AI and the regions: The Budget adds £60 million to the Sovereign AI Fund and a new AI Cyber Security Centre of Excellence in Manchester. From April 2027, mayors will keep a 20% share of local business rates, backed by £285 million for regional growth funds in 2027-28.

The bottom line

As is often the case, the Budget is something of a mixed bag for SMEs. Holding National Insurance steady, easing business rates and sparing SMEs a fresh tax shock all count for something. But a 3.9% rise in the wage floor at a time when SMEs also have to grapple with the huge changes to employment law under the Employment Rights Act 2025 means the pressure on small employers will remain. With most of these changes taking effect from April 2027, the coming months will be an important window for SMEs to review their budgets and plan ahead.