Salary sacrifice pensions: NI saving capped at £2,000 from April 2029
From 6 April 2029, only the first £2,000 a year of pension contributions made through salary sacrifice will be free of National Insurance.
Salary sacrifice lets employees swap part of their salary for employer pension contributions. Today, the sacrificed amount is free of both employee and employer National Insurance.
What's changing
From 6 April 2029, the National Insurance exemption will be capped at £2,000 a year per employee. Amounts sacrificed above £2,000 will attract employer and employee National Insurance, like other pay.
The law allowing this, the National Insurance Contributions (Employer Pensions Contributions) Act 2026, received Royal Assent on 29 April 2026.
What stays the same
- Pension contributions through salary sacrifice still get income tax relief, within the usual limits
- Employer pension contributions that aren't made through salary sacrifice are not affected
Who is affected
Around 3.3 million employees sacrifice more than £2,000 a year, often higher earners who sacrifice bonuses.
Employers running salary sacrifice schemes should review the costs before 2029. We can help you model the impact.