The UK’s latest Budget introduces an important shift in how pension contributions made via salary sacrifice will be treated for National Insurance Contributions (NICs). These changes could materially impact employers who rely on salary sacrifice to enhance pension savings for their workforce.
Below is a clear breakdown to help you brief your clients.
NICs will apply to salary-sacrificed pension contributions above £2,000 per year
- The first £2,000 of pension contributions made under salary sacrifice will remain exempt from employee’s and employer’s NICs.
- Any amount above this threshold will attract both employee and employer NICs.
Other employer pension contributions remain NIC-exempt
Contributions made outside of salary sacrifice arrangements are not affected.
Salary sacrifice still protects access to key benefits
Despite the NIC changes, salary sacrifice remains useful for:
- Retaining eligibility for tax-free childcare
- Retaining child benefit entitlement
Further HMRC guidance expected
HMRC will carry out a consultation before issuing detailed rules ahead of April 2029.
What This Means for Your Clients
These reforms may affect:
- Employers using salary sacrifice for pension optimisation
- High-earning employees making large contributions
- Businesses with reward strategies built around NIC savings
- Clients budgeting for expanded NIC liabilities
Advisers should begin scenario-planning with clients now, particularly for those making contributions (or facilitating contributions) above the £2,000 annual level.
How Corridor Helps You Support Your Clients
Corridor works with partner firms to deliver clear, specialist guidance on cross-border and UK reward structures. We can help you help your clients by:
- Assessing NIC exposure under the new rules
- Reviewing or redesigning salary sacrifice schemes
- Preparing communications for employees
- Advising on tax-efficient alternatives as part of broader reward planning
- Ensuring compliance once HMRC publishes the final guidance
If your clients rely on salary sacrifice for pension savings, now is the time to review their approach.
