The 2025 Autumn Budget sets out new tax, National Insurance and wage measures that could impact UK beauty businesses
The 2025 Autumn Budget was delivered today (November 26) by Chancellor Rachel Reeves in the House of Commons.
The Budget is the UK Government’s annual plan outlining tax, spending and economic measures for the coming year, and it sets out changes that affect businesses, households and public services, including income tax, National Insurance, wages, pensions and business costs.
Frozen income tax and National Insurance thresholds
The Autumn Budget 2025 confirmed that income tax and National Insurance thresholds will remain frozen until the end of the 2030/31 financial year (three years longer than initially planned).
For beauty business owners, this could mean that as wages rise in line with inflation, a larger portion of staff salaries will fall into higher tax brackets, effectively increasing the cost of employment.
This freeze affects all employees and could require careful planning for salons with tight operating margins. While it provides certainty for long-term budgeting, it also increases the risk of higher payroll costs over time.
Minimum wage increases and labour costs
From April 2026, the National Minimum Wage for workers over 21 will rise to £12.71 per hour, up from £12.21. The Budget also confirmed increases for younger age groups:
- 18-20-year-olds: £10.85 per hour (up from £10)
- 16-17-year-olds and apprentices: £8 per hour (up from £7.55)
Given the labour-intensive nature of beauty services, this rise will significantly impact staffing budgets. Businesses may need to review staff schedules, consider price adjustments, or assess service offerings to manage the increased wage bill.
For apprenticeship employers, the Budget confirms that the apprentice minimum wage will rise to £8 an hour, up from £7.55. This applies to apprentices under 19, or those over 19 in the first year of their apprenticeship.
As apprenticeships are a key entry route into the beauty sector, this increase will raise staffing costs for salons that rely on trainees. While positive for apprentice pay and progression, the higher rate may require businesses to review training budgets and recruitment plans for 2026 and beyond.
Pension contributions and dividend tax
The Budget introduces a tax on salary-sacrificed pension contributions above £2,000 from April 2029. Many businesses use salary-sacrifice schemes as a way to incentivise staff while saving on National Insurance contributions. The new tax reduces the financial benefit of these arrangements for employees and may alter how employers structure compensation packages.
In addition, the dividend tax will rise by 2%, which can affect owner-operators who draw profits from their businesses in this way. Combined with the frozen income and National Insurance thresholds, these measures increase the financial pressure on small business owners in the sector.
Inflation and operating costs
The Office for Budget Responsibility forecasts UK inflation at 3.5% for 2025, slightly higher than earlier predictions. For beauty businesses, rising inflation alongside wage increases and tax adjustments may lead to higher operating costs, from utilities and rent to products and professional insurance.
Businesses may face difficult decisions balancing affordability for clients with sustainable wages and staff retention. Monitoring overheads and adjusting pricing models could become a priority for salons and spas over the next financial year.
Fuel duty freeze extends relief for mobile beauty therapists
The Chancellor confirmed that the temporary 5p cut in fuel duty on petrol and diesel will remain in place until September 2026, before rising gradually over a six-month period.
This continuation will offer short-term relief to mobile beauty therapists, freelance MUAs and mobile nail technicians who rely on their cars to travel between client appointments. While the freeze does not reduce costs compared with previous years, it prevents a rise at a time when other operating expenses are increasing.
Potential tourist levy for hotel-based spas
The Budget confirms that English regional mayors could soon be granted powers to introduce a levy on overnight hotel and holiday-let stays, following similar models already planned in Scotland and Wales.
While this measure is still subject to consultation, it could affect spa resorts, hotel spas, and beauty facilities located within hospitality settings, particularly in tourist-heavy regions. Any increase in the cost of overnight stays may influence guest booking patterns, short-break demand and overall hotel package pricing.
For beauty operators working inside hotels, the introduction of a local tourist tax could have indirect implications for footfall, package uptake, and spend-per-guest, especially during periods of softer demand.
Industry reacts
Lesley Blair, chief executive of Babtac, said, “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. However, the freeze on National Insurance thresholds will effectively 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.”
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