Guide · announced Autumn Budget 2025 · updated 3 September 2026
Salary sacrifice changes 2029: the £2,000 NI cap
From 6 April 2029, only the first £2,000 a year you put into a pension through salary sacrifice stays free of National Insurance. The rest still gets income tax relief but pays NI like any other employee contribution. Here is what that means in pounds, and what is not changing.
The change in one table
| NI free amount | First £2,000 of sacrificed pension contributions per tax year |
| Above the cap | Employee NI (8% or 2%) and employer NI (15%) apply, like an ordinary employee contribution |
| Income tax relief | Unchanged, on the whole contribution |
| Employer contributions not funded by sacrifice | Still NI free, no cap |
| Start date | 6 April 2029 |
| Legislation | National Insurance Contributions (Employer Pensions Contributions) Act 2026, Royal Assent 29 April 2026. Regulations set the limit each tax year; the first must set it at £2,000 |
Source: HM Treasury guidance published 26 November 2025 and the HMRC tax information and impact note of 4 December 2025, both on gov.uk. Links at the foot of the page.
Who pays more, and how much
If you sacrifice £2,000 a year or less, nothing changes. HMRC estimates that 56% of employees currently using salary sacrifice for typical contributions sit under the cap. Above it, the excess is treated like a normal employee contribution: you pay employee NI on it and your employer pays employer NI.
Three illustrations using the 2026/27 NI rates (8% up to £50,270, 2% above; employer 15%). The government has not published NI rates for 2029/30, so treat these as the order of magnitude, not the final bill.
| Case | Above the cap | Extra employee NI | Extra employer NI |
|---|---|---|---|
| £35,000 salary, £1,800 sacrificed | £0.00 | £0.00at 8% | £0.00 |
| £45,000 salary, £4,000 sacrificed | £2,000.00 | £160.00at 8% | £300.00 |
| £70,000 salary, £7,000 sacrificed | £5,000.00 | £100.00at 2% | £750.00 |
Notice the pattern. Basic rate earners lose 8p per pound above the cap; higher earners lose only 2p, because their NI rate is already 2%. The bigger cost for larger sacrifices falls on the employer, at 15p per pound, which is why some employers may revisit whether they pass their NI saving into staff pensions. The income tax saving (20%, 40% or 45%) is untouched either way, so sacrificing above £2,000 still beats not saving at all.
What is not changing
Income tax relief. Gov.uk is explicit: contributions through salary sacrifice, like all pension contributions, remain exempt from income tax within the usual limits. The cap is NI only.
Employer contributions. All employer pension contributions that are not funded by a sacrifice continue to be free of NI, with no cap.
Adjusted net income. Sacrificing salary still lowers your adjusted net income, which matters for the £100,000 personal allowance taper and for Tax-Free Childcare eligibility. The impact note confirms this effect is unchanged, though above £2,000 you now pay NI on the sacrificed amount.
The years before 2029. Tax years 2026/27, 2027/28 and 2028/29 run under today’s rules. Our salary sacrifice calculator shows the full current saving.
Why the government is doing it
The impact note gives the numbers. National Insurance forgone through pension salary sacrifice was £2.8 billion in 2016/17 and £5.8 billion in 2023/24, and was projected to reach £8 billion by 2030/31 without a change. Most other salary sacrifice benefits lost their tax advantage in 2017; pensions were the exception. The stated aim of the £2,000 limit is to stop higher earners taking a disproportionate share of the relief while leaving typical contributions alone.
What to do before April 2029
Check your annual sacrifice against £2,000. If you are under it, you can ignore the change. If you are over it, the NI saving on the excess disappears in 2029/30, but the income tax saving stays, so the contribution is still worth making; it just costs a little more in take-home pay.
Ask your employer what they plan to do with their NI saving. Employers who currently pass it on will save less above the cap and may change their policy. Employers must also report the total sacrificed through payroll from 2029, and HMRC has said further guidance will appear on gov.uk before then. We will update this page when it does.
Common questions
What are the salary sacrifice changes in 2029?
From 6 April 2029, only the first £2,000 a year of pension contributions made through salary sacrifice will be exempt from National Insurance. Anything sacrificed above £2,000 will carry employee NI and employer NI, the same as an ordinary employee workplace pension contribution. Income tax relief on the whole amount is unchanged.
Is salary sacrifice being scrapped?
No. Salary sacrifice for pensions continues, and gov.uk says employers and employees can still contribute as much as they like through it. What ends is the unlimited National Insurance exemption. The first £2,000 a year keeps the full NI saving; the excess loses only the NI part of the benefit.
When does the £2,000 cap start?
6 April 2029, the first day of the 2029/30 tax year. The cap is set per tax year. Nothing changes for 2026/27, 2027/28 or 2028/29.
Does the cap affect income tax relief on my pension?
No. Contributions through salary sacrifice, like all pension contributions, stay exempt from income tax within the usual annual allowance limits. The cap is a National Insurance measure only.
Do employer pension contributions count towards the £2,000?
Only the part that comes from your sacrificed salary. Ordinary employer contributions that are not funded by a salary sacrifice stay free of NI with no cap, according to the gov.uk guidance.
Will I need to do anything?
Not with HMRC. Gov.uk says employees will not need to contact HMRC; employers will report the total amount sacrificed through payroll and apply NI to the excess. What you might do is review the size of your sacrifice before April 2029 and compare it with the £2,000 threshold.
Could the cap change again at the Autumn Budget 2026?
Possibly, though nothing has been announced. The Budget is on Wednesday 28 October 2026. The Act that introduces the cap lets regulations set the contribution limit for each tax year, starting at £2,000 for 2029/30. We check the gov.uk pages weekly and daily around Budget day.
Related guides
Sources
- gov.uk, HM Treasury: Changes to salary sacrifice for pensions from April 2029 (published 26 November 2025)
- gov.uk, HMRC: Salary sacrifice reform for pension contributions, tax information and impact note (published 4 December 2025; operative date 6 April 2029)
- legislation.gov.uk: National Insurance Contributions (Employer Pensions Contributions) Act 2026 (c. 15)
- gov.uk: Rates and thresholds for employers 2026 to 2027 (NI rates used in the examples)
- gov.uk, HM Treasury: Budget date confirmed as Wednesday 28 October 2026 (31 July 2026)
Figures checked on 3 September 2026.