Measures included in Rachel Reeves’s Budget will choke the UK’s workforce, an expert has warned. In a new environment that will include a stricter salary sacrifice scheme and a prolonged income tax threshold freeze, Frances Li, the founder and director of Biscuit Recruitment, has told employees that they should do three things. “After this Budget, employees need to look beyond salary,” she said. “They should ask about progression, training and benefits — because long-term skills can protect your future more than a pay rise.”
The specialist then warned: “Tracking your value at work is no longer optional,” she adds. “It’s becoming essential for career protection.” Mid-career professionals are set to feel the squeeze most sharply, Ms Li suggested, as promotions could “soon feel pointless” as taxes erode gains. The freezing of thresholds will act as an “invisible pay cut” that risks dampening ambition across the workforce, she added. Ms Li said: “This Budget won’t make people quit, but it will make them stop stretching. If pay can’t reward progress, opportunity must.”
List of recommendations
Ms Li recommended employees focus on:
- Understanding their total compensation package, not just salary
- Asking where development, mentoring or stretch projects exist
- Tracking achievements and impact to prepare for future negotiations
Salary sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from national insurance from April 2029.
Contributions above £2,000 will be treated as ordinary employee pension contributions in the tax system and subject to national insurance contributions.
Ms Li said: “The cap on salary-sacrificed pension contributions above £2,000 will hit a specific group.
“Not the ultra-high earners, but the professionals in their late 20s, 30s and 40s who are doing the responsible thing and saving for retirement.
“They are the backbone of the workforce, and now they face a difficult choice. Save for the future or protect their take-home pay.”
The expert added: “For many, that won’t feel like a real choice at all. We may start to see employees lower pension contributions just to stay afloat month to month, and that could weaken long-term financial resilience.”
“A professional earning £45,000 to £55,000 could find that a promotion leaves them only marginally better off once tax, NI and pension limits are factored in. That’s already shaping how some candidates approach their career decisions.”
The freeze in income tax thresholds will result in 780,000 more basic-rate, 920,000 more higher-rate, and 4,000 more additional-rate income tax payers in 2029/30 as earnings rise over time.
People are dragged into paying 20% income tax if their earnings rise above £12,570, with the 40% rate from £50,271 and the 45% band from £125,140.
Ms Li said: “The income tax threshold freeze to 2031 may bring in billions, but it risks dampening progression.
“We’re already hearing candidates ask: What’s the point of progressing if most of the gain goes to tax? When people feel their effort is absorbed before it reaches them, ambition naturally slows.”
She added: “The freeze has acted like an invisible pay cut. We’re already seeing hesitation among skilled workers approaching the next tax bracket. If that mindset spreads further, job mobility and innovation will slow across the economy.”