News

The Budget on 26 November 2025 announced an upcoming change to the salary sacrifice scheme from 6 April 2029.

Salary sacrifice is when you ask your employer to reduce your gross salary, or sacrifice a bonus and in return, your employer pays the same amount into your pension.

One of the advantages of using a salary sacrifice scheme is that it produces National Insurance (NIC) savings for both the employee and the employer; as your gross salary is lower, so in turn is the amount of NIC paid to HM Revenue & Customs (HMRC).

It is this NIC part of the salary sacrifice scheme which is going to be changed from 6 April 2029.  From this date onwards, salary sacrifice arrangements for pensions can continue as normal, but only the first £2,000 of contributions per tax year per employee will be exempt from NICs.

Any employee contributions which exceed £2,000 will be subject to employer and employee NICs.

A consultation project will be launched in due course, looking at how this change is going to be implemented; however it is likely that employers will have to disclose the amount of salary sacrificed in their existing payroll software to generate the extra NIC liability due.

Depending on the level of taxable earnings an employee has, and using the NIC rates in place for the current 2025/26 tax year, employees could see either 2% or 8% NICs being due on their excess contributions. The NIC rate for employers is currently 15%.

Please note that the Income Tax advantages of making pension contributions through a salary sacrifice scheme will continue as normal.

If you have any queries on salary sacrifice, and what can be done to maximise the savings prior to April 2029, please do not hesitate to get in touch on 01228 711888 or 01387 270340

Speak to our team