Autumn Budget 2025: What it Means for Beauty

The Chancellor of the Exchequer, Rachel Reeves, delivered the Government’s Autumn Budget this afternoon, setting out the fiscal and economic roadmap for the years ahead. 

As always, the British Beauty Council has been working through the details to provide you with an immediate, targeted analysis of what these measures mean for your businesses, employees, and the wider beauty sector.

The overarching theme of this Budget is one of targeted growth and fiscal tightening, presenting both opportunities, such as skills reforms and the removal of the £135 de minimis tax exemption, and considerable new cost pressures in the form of wage increases.

1. Key Business Cost Changes: Wage Increases and Tax Pressure

This Budget confirms significant increases in operational costs for all employers, creating a dual challenge especially for service-based businesses in the beauty sector:

• National Living Wage (NLW) Increase: The National Living Wage (NLW) will rise to £12.71 per hour from April 2026 (a 4.1% increase). As a highly labour-intensive sector, this mandatory uplift places immediate and considerable upward pressure on payroll costs across the entire supply chain. This mandatory uplift, while beneficial for our lowest-paid workers, requires urgent forecasting and budgeting by all employers.
• The Fiscal Drag Squeeze: The freeze on Income Tax and Employee National Insurance Contributions (NIC) thresholds—known as ‘fiscal drag’—means that as staff wages rise, more of their income is taxed. This squeeze on employee take-home pay indirectly forces employers to increase gross wages to attract and retain staff, compounding the overall cost of employment and pressuring profit margins. With Oxford Economics data already predicting a drop of 20,000 jobs this year, this raises concerns for further losses.
• Increased Tax on Dividends: The Chancellor announced a 2% increase in the tax on dividend income, effective from April 2026. This is a direct financial blow to limited company directors, including many self-employed hairstylists and beauty therapists, salon owners, and suppliers who rely on dividends for their primary income. The basic rate will rise from 8.75% to 10.75%, and the higher rate from 33.75% to 35.75%, significantly increasing the personal tax burden on profits already subject to Corporation Tax.
• Pension Salary Sacrifice Cap: A new annual cap of £2,000 was announced on the amount of salary that can be sacrificed into workplace pensions while remaining exempt from National Insurance Contributions (NICs), effective from April 2029. Contributions above this threshold will be subject to both employer and employee NICs. This represents a future direct payroll cost increase for employers and adds complexity to staff benefit planning.

2. Competitive Boost: Ending the £135 Import Loophole

In a major win for domestic businesses, the Government has announced customs duty will now apply to parcels of any value, removing the £135 de minimis tax exemption for overseas importers of low-value products to the UK.

This long-sought-after measure closes a major loophole that has long created an unfair competitive advantage for foreign e-commerce giants. By ensuring that low-value imported goods are subjected to the same VAT and duty rules as products sold by British retailers and manufacturers, the Government is finally ensuring a more level playing field for domestic businesses. This reform is vital for:

• UK Beauty Manufacturers: removing unfair competition from cheap products that bypass the tax system and aren’t guaranteed to meet the UK’s high regulatory product safety standards.
• High Street Retailers: Helping them compete fairly on price and tax compliance.

3. The Skills Overhaul: A Major Win for the Sector

Our persistent lobbying for a more flexible training system has delivered a significant change. The Chancellor formally confirmed the replacement of the current Apprenticeship Levy with the Growth and Skills Levy (GSL), which will come into effect from April 2026. This confirmation in the Budget provides the certainty required for businesses to plan their future training investments. 

Key Takeaways:

• Flexible Training: The GSL allows employers to use their levy funds on a wider range of short-term training courses and ‘apprenticeship units’ in addition to traditional apprenticeships. This directly addresses the beauty sector’s need for fast, targeted upskilling in areas like digital marketing, AI, and sustainability.
• Focus on Core Skills: The Government has axed public funding for Level 7 (Master’s level) apprenticeships for those aged 22 and over, confirming the priority shift to funding Level 2 and Level 3 qualifications. This reallocation of funds supports entry-level and technical skills – the lifeblood of our industry.
• Increased Budget: An increase in the overall Apprenticeship Budget to over £3 billion for 2025/26 underpins this renewed focus on workforce development (up from approximately £2.73 billion in 2024/25).

Rachel Reeves also announced that the cost of apprenticeships for under 25-year-olds will be made completely free for SMEs, removing the 5% part-funding the apprenticeship. Businesses will still be expected to pay the Apprenticeship Wate Rate relevant to the apprentice’s age.

4. High Street & Business Rates Relief

The Budget confirmed a long-term plan for Business Rates Reform, which is intended to rebalance the tax burden to benefit high street businesses, including salons and product retailers. 

What we know:

• Lower Tax Rate for RHL: This includes the introduction of a lower, supportive statutory tax rate specifically for high street retail, hospitality, and leisure (RHL) properties, which include those within our industry, with rateable values below £500,000, effective from April 2026. 
• No More Temporary Reliefs: The new structure will replace the uncertainty of temporary reliefs with two permanently lower statutory multipliers for qualifying RHL properties: the Small Business RHL Multiplier (for Rateable Values (RVs) under £51,000) and the Standard RHL Multiplier (for RVs between £51,000 and £499,999). The actual multiplier rate will be announced closer to the April 2026 revaluation.
• Big Business Could Suffer: The reform is being funded by changes to rates levied on large distribution and warehouse properties, as well as properties with rateable values above £500,000. The Council has raised concerns regarding the impact on larger flagship stores which drive vital footfall to other smaller highstreet businesses. As a result, Rachel Reeves announced a support fund for qualifying properties that will see larger increases to help them to transition. We will be monitoring this closely as further details are published.

Speaking in response to the Budget, Victoria Brownlie, Chief Policy & Sustainability Officer said: 

“There are things to like and challenge in this Autumn’s Budget, but the work starts now for the Council in engaging with the Department for Business & Trade, Treasury and the Department for Education to determine the detail of these measures in relation to our sector. As ever, we remain committed to ensuring the beauty industry’s voice is both heard and valued in ongoing policy discussions.”