Where this fits
If you sacrifice more than £2,000 a year, the change affects how you and your employer fund your pension.
Sunny Bharj
Independent Financial Adviser
Tony Springer
Independent Financial Adviser
From 6 April 2029 only the first £2,000 a year of pension contributions made through salary sacrifice stays free of National Insurance. Contributions above that are charged employee and employer National Insurance. Income tax relief on the contributions does not change.
You agree to give up part of your salary or a bonus, and your employer pays the same amount into your pension. The money is never paid to you as salary, so neither you nor your employer pays National Insurance on it.
In 2026/27 that saves an employee 8% on earnings between the primary threshold and the upper earnings limit and 2% above it, and saves the employer 15%.
It was announced at the Budget on 26 November 2025. The National Insurance Contributions (Employer Pensions Contributions) Act 2026 became law on 29 April 2026 and requires the first regulations under it to set the limit at £2,000 a year, from the 2029/30 tax year.
HMRC estimates that 7.7 million employees use salary sacrifice for pension contributions, and 3.3 million of them sacrifice more than £2,000 a year.
At 2026/27 rates, £8,000 sacrificed above the limit by an employee earning over £50,270 would carry £160 of employee and £1,200 of employer National Insurance.
No. The limit applies from the 2029/30 tax year, which starts on 6 April 2029.
The income tax relief remains in full, the first £2,000 stays free of National Insurance, and employer contributions made outside the arrangement stay free of it too. How much of the saving you keep depends on how much you sacrifice and on your pay.
No. The £60,000 annual allowance is a separate income tax limit and is not affected.
The 2026/27 rates: 2% for an employee whose pay stays above the upper earnings limit, and 15% for the employer. National Insurance rates for 2029/30 have not been set.
If you sacrifice more than £2,000 a year, the change affects how you and your employer fund your pension.
Independent Financial Adviser
Independent Financial Adviser
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