What changes
Today, pension contributions made through salary sacrifice carry no National Insurance at all, for you or your employer. From 6 April 2029, under the NICs (Employer Pensions Contributions) Act 2026, only the first £2,000 a year of sacrificed pension contributions stays free of National Insurance. Anything above £2,000 is charged employee and employer National Insurance as if it had been paid as salary.
Income tax doesn’t change. Sacrificed pension contributions still come out before income tax, so you keep full tax relief at your highest rate.
Who it affects
Anyone sacrificing more than £2,000 a year into a pension: that’s about £167 a month. It doesn’t affect:
- sacrifices of £2,000 a year or less
- employer pension contributions that aren’t paid through salary sacrifice
- pension contributions you make from your take-home pay, under relief at source or net pay
- salary sacrifice for cars, bikes and other benefits
What it costs
The extra National Insurance on the amount over £2,000 is 8% for you if your pay is below £50,270, or 2% above it, plus 15% for your employer.
On a £70,000 salary with a £10,000 pension sacrifice, £8,000 is over the cap. Your pay is above £50,270, so the extra is 2%: £160 a year. Your employer’s National Insurance saving falls from £1,500 to £300.
On a £40,000 salary with a £6,000 sacrifice, £4,000 is over the cap and it’s all below £50,270, so you pay 8% on it: £320 a year more. Your employer pays £600 more. Basic rate taxpayers with large sacrifices are hit harder than higher earners.
If your employer passes its National Insurance saving into your pension, that top-up will also shrink, because there’s less saving to pass on.
What isn’t settled yet
- Thresholds. The National Insurance rates and thresholds for 2029/30 aren’t set. Our calculator uses 2026/27’s and labels the view as an assumption.
- More than one job. The regulations on how the £2,000 works across several jobs aren’t out yet. We apply it per job.
- Student loans. Student loan repayments follow the same pay as National Insurance, so we expect the excess to count for them too. That’s our reading, not yet confirmed.
What to do now
Nothing changes before April 2029, and salary sacrifice will still be worth doing above the cap: you keep the income tax relief, and the extra National Insurance is 2% for higher earners. But it’s worth knowing what your sacrifice will cost from 2029, especially if you’re a basic rate taxpayer sacrificing a large amount, and asking your employer whether it plans to change its scheme or its top-ups.