Wed, 26 Nov 2025

Wed, 26 Nov 2025 Salary sacrifice tax break cut on workplace pensions

Some pension savers face a hit to the amount of money they can put into their pension without paying national insurance.

* From 2029, there will be a cap of £2,000 per year on salary sacrifice contributions that can be shielded from employer and employee National Insurance Contributions (NICs).
* The current limit is much higher, allowing workers to put more money into their pensions without paying NICs.
* The measure aims to raise £4.7bn in extra NI contributions in 2029, but experts say this may not happen as companies can restructure pay and pension schemes to avoid the charge.
* Salary sacrifice lets workers and employers agree to take a higher salary out of pay and shift it into a pension before NICs and income tax are applied.
* The £2,000 cap will mean that contributions above this amount will incur NICs for both staff and companies.
* About 7.7 million employees used salary sacrifice schemes in 2024.
* Experts say the change may lead to employers reducing planned pay rises and contributing less to pensions overall.
* The removal of the tax break could also increase administration costs for companies.
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