What the 2029 salary sacrifice cap costs employers
From 6 April 2029, an employer pays 15% National Insurance on pension salary sacrifice above £2,000 a year for each employee, and the employee pays their usual National Insurance on the same amount. An employer with ten staff each sacrificing £8,000 a year would pay £9,000 a year more at today's rates. The first £2,000 stays free of National Insurance, income tax relief is unchanged, and employer contributions paid outside salary sacrifice keep their relief. National Insurance thresholds stay at 2026 to 2027 levels until the 2030 to 2031 tax year.
Figures checked 27 October 2026.
What changes
- The first £2,000 a year sacrificed into a pension stays free of National Insurance
- Salary or bonus sacrificed above £2,000 is liable to employee and employer Class 1 National Insurance
- Income tax relief on the contribution is unchanged
- Employer contributions paid on top of salary, outside salary sacrifice, are unaffected
- The Act received Royal Assent on 29 April 2026, and the limit applies from the 2029 to 2030 tax year
Worked examples
| Employee | Sacrificed a year | Employee NI saved now | Employer NI saved now | Employee NI saved from 2029 | Employer NI saved from 2029 |
|---|---|---|---|---|---|
| £30,000 salary, 5% | £1,500 | £120 | £225 | £120 | £225 |
| £45,000 salary, 5% | £2,250 | £180 | £337.50 | £160 | £300 |
| £80,000 salary, 10% | £8,000 | £160 | £1,200 | £40 | £300 |
At 2026 to 2027 rates throughout: employer 15% above £5,000 a year; employee 8% between £12,570 and £50,270 and 2% above. Rates in 2029 may differ.
What it costs an employer
In the examples, the employer's saving on the £45,000 employee falls by £37.50 a year and on the £80,000 employee by £900 a year. An employer with ten employees each sacrificing £8,000 would pay £9,000 a year more in National Insurance from April 2029 at today's rates.
Pension contributions an employer pays on top of salary are a deductible business expense for corporation tax where they are paid wholly and exclusively for the business, and they carry no National Insurance before or after 2029.
Before April 2029
Payroll software, employment contracts and pension scheme rules that refer to salary sacrifice will need checking against the £2,000 limit. Buzz Accounting runs payroll for employers and can model the change on your own payroll figures.
Your employees' own pensions
Employees asking what the change means for their own pension can read what is changing with pension salary sacrifice in 2029 on Buzz Financial Services, a separate FCA-regulated firm.
Common questions
When does the cap start?
6 April 2029, the start of the 2029 to 2030 tax year.
Does it change income tax relief?
No. The government's policy paper states that income tax relief is unchanged.
Are employer contributions outside salary sacrifice affected?
No. The policy paper states that the National Insurance relief on employer contributions made outside salary sacrifice is unchanged.
Does it apply to bonus sacrifice?
Yes. The limit applies to salary or bonus given up for pension contributions.
Sources
- GOV.UK policy paper: salary sacrifice reform for pension contributions from 6 April 2029
- National Insurance Contributions (Employer Pensions Contributions) Act 2026, section 1
- HM Treasury, Budget 2026: overview of tax legislation and rates, 28 October 2026
- GOV.UK: rates and thresholds for employers 2026 to 2027
- HMRC Business Income Manual BIM46030: pension contributions
- GOV.UK: salary sacrifice and the effects on PAYE
Related guides
Guides for employers
- Financial wellbeing cost per employee in the UK
- Employee financial wellbeing for small businesses
- Financial coaching for employees
- Is employer-paid financial coaching a taxable benefit?
- The £500 pensions advice exemption for employers
- Employee financial wellbeing survey questions
- Automatic enrolment duties for small employers
- Earned wage access and salary advances for employees
- Supporting employees through life changes
- How to set up a financial wellbeing programme
- Financial wellbeing policy template
- Financial wellbeing providers' prices compared
- Salary sacrifice calculator
- Benefit or pay rise calculator