Autumn Budget 2025 – Stronger Foundations or Friction? Top 5 highlights for schools and academies

26th Nov 2025

Many had been dreading this Budget – only the second ever to be delivered by a female chancellor – but little came as a surprise due to the leaks from the Office for Budget Responsibility (OBR) just a few hours before Rachel Reeves stepped forward.

“Let there be no doubt that this is a government on the side of our kids”.

Well, what do you think - are they?

For the education sector, there wasn’t much new, but there were a few announcements not already flagged by the OBR. As ever with government budgets, the devil is in the detail – or sometimes, in the lack of it!

So what can schools and academies take away from it all? Here are our top 5 highlights.

Wage bills to increase pensions taxed

The National Minimum Wage will rise by 4.09% from April 2026, with the minimum increasing to £12.71 per hour. Those aged 18-21 will be boosted further by their minimum wage increasing by 8.5% (to £10.85 per hour) as the government looks to align all minimum wage levels for all adults.

Those support staff on the National Minimum Wage will no doubt appreciate this increase, but it will inevitably raise costs for schools and academies.

Additionally, NI and income tax thresholds will now remain frozen until 2030/31, dragging more people into higher tax bands over time as pay increases are awarded.

Pensions taxed

The biggest announcement was the reduction in the amount of pension that can be salary sacrificed avoiding National Insurance. From April 2029, those contributing more than £2,000 per annum to their pension will see National Insurance (NI) applied – both from an employee and employer perspective. Therefore schools will want to see some funding to help support the employer element. Employees paying more than £2,000 per annum will be hit in their pocket as their net pay reduces. Income tax relief remains unaffected.

For example, a teacher making pension contributions of £4,000 per annum will now pay NI on the £2,000 above the limit. This means that employee would pay approximately £240 per year NI (at the 12% primary rate).

Some staff may reconsider how much they contribute via salary sacrifice – possibly reducing their contributions. Over time, this could of course lead to smaller pension posts.

Additional funding but with caveats

The Chancellor confirmed secondary schools will receive £5m in 2026/27 to help boost their libraries (primarily book supplies) – equating to about £1,448 per secondary school! This is to celebrate the National Year of Reading.

The Chancellor also stated that she would be providing £18m to improve and upgrade playgrounds across England. Sounds fantastic, but again, the devil is in the detail as the Budget papers state this is for up to 200 playgrounds. So less than 1% of our schools will receive approximately £90,000 each. The basis for allocation remains unclear, with details promised later. This funding will be provided across two years - 2026-27 and 2027-28.

Inflation on the rise

The OBR predicts that with the announcements within the Autumn Budget inflation in the UK will average to 3.5% this year (up from 3.2%) before decreasing to 2.5% in 2026 (previously 2.1%). It should then fall to 2.0% in 2027.

Reeves claimed inflation is coming down faster—but is it?

Costs will continue to increase, and it is important that schools and academies look to negotiate with suppliers when increases are more than inflation. Of course, until wage costs increase we won’t fully know the impact this will have on inflation but the OBR’s predictions give us some indication.

Equally, will schools themselves look to increase their own prices by a similar rate? Will school meals increase? Will you increase the rate to rent your premises?

Cost burden for those with a sweet tooth

From January 2028, the threshold for the sugar tax will reduce from 5g per 100ml to 4.5g per 100ml. Pre-packaged milk-based drinks (milkshakes, lattes etc) will lose their previous exemption from the tax as well.

Manufacturers will therefore look to reformulate products or absorb the cost. Reality is, the cost will be passed onto consumers. Therefore schools may see another increase in catering costs further down the line.

On the upside, it could of course mean improved pupil health and reduced sugar intake. Maybe improved behaviour?

For the education sector, the details matter – not just the headlines. Leaders and staff face questions about financial sustainability, professional incentives, and pupil wellbeing, and the answers will shape how the vision of a “secure future” translates into reality in classrooms across the country.

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