· 3 min read
Salary sacrifice NI cap from 2029: who loses and how much
From April 2029, pension salary sacrifice above £2,000 a year attracts National Insurance. Worked examples show the extra cost for employees and employers.
Pension salary sacrifice has long been the most efficient way to save for retirement through work. You give up salary, your employer pays it into your pension, and nobody pays income tax or National Insurance on it. From 6 April 2029, part of that NI saving goes.
What is changing
Salary or bonus sacrificed into a pension above £2,000 per employee per tax year will attract Class 1 National Insurance, for both the employee and the employer. The first £2,000 stays NI-free. Income tax relief is unchanged, so the sacrificed amount still comes out of your taxable pay in full.
HMRC has said further guidance is coming before April 2029, including how the £2,000 works for people with more than one job.
What sacrifice saves today
Today, every pound sacrificed avoids:
- employee NI at 8% on pay between £12,570 and £50,270, or 2% above that;
- employer NI at 15% on pay above £5,000.
From April 2029, those savings only apply to the first £2,000 a year.
Worked examples
These use today's National Insurance thresholds and rates, which are frozen until April 2031, and assume monthly pay.
| Salary | Pension sacrifice | Extra employee NI a year | Extra employer NI a year |
|---|---|---|---|
| £30,000 | £1,500 (5%) | £0 | £0 |
| £45,000 | £4,500 (10%) | £200.04 | £375.00 |
| £60,000 | £4,800 (8%) | £56.04 | £420.00 |
| £110,000 | £10,000 | £159.96 | £1,200.00 |
| £100,000 | £20,000 | £360.00 | £2,700.00 |
A few patterns stand out.
- Small sacrifices are untouched. Anyone sacrificing £2,000 a year or less sees no change.
- Middle earners lose the most per pound. The £45,000 earner pays 8% NI on the £2,500 above the cap because their pay sits below £50,270. The £60,000 earner pays only 2% on the excess.
- Employers lose more than employees. In every example the employer's extra NI is bigger than the employee's. That matters because many employers share their saving with staff.
The knock-on for employer top-ups
Some employers pass on all or part of their NI saving as an extra pension contribution. If that saving shrinks, the top-up may shrink with it. Others may decide salary sacrifice schemes are no longer worth running for pensions alone. Neither is certain, but it is worth asking your employer how they plan to respond.
What does not change
- Income tax relief. Sacrifice still reduces taxable pay pound for pound.
- The £100,000 fix. Sacrifice still lowers adjusted net income, so it still restores the Personal Allowance and avoids the 60% rate. For someone on £110,000 sacrificing £10,000, the cap adds about £160 a year of employee NI against a much larger income tax saving.
- Relief at source and net pay schemes. These never gave an NI saving, so they are unaffected.
- Other schemes. The change covers pension sacrifice. Cycle to work and electric car schemes are separate.
What to do now
- Check how your pension is paid. Your payslip will show either a lower gross pay (sacrifice) or a pension deduction.
- If you already planned to raise contributions, doing it before April 2029 keeps the full NI saving for the years in between.
- Ask your employer whether they pass on their NI saving and whether that will continue after 2029.
- Use our salary sacrifice calculator to see your current saving, and model the post-2029 position by treating anything above £2,000 as if it were paid through net pay.