The recent UK Budget has introduced significant reforms to the way pension contributions made under salary sacrifice arrangements will be treated for National Insurance purposes.
A salary sacrifice arrangement is when employees sacrifice their earnings in return for an equal amount of employer pension contribution. Please see below an update regarding the key changes:
- Effective date: From 6 April 2029
- NIC treatment: Pension contributions made under salary sacrifice arrangements will be subject to both employee’s and employer’s NICs on the portion that exceeds £2,000 per annum
- Other employer contributions: Remain exempt from NICs
- Salary sacrifice benefits: The arrangement will continue to be effective for retaining access to tax‑free childcare and/or child benefit
- Next steps: HMRC will consult with stakeholders and issue detailed guidance before April 2029
How Abbiss Cadres can help
Abbiss Cadres can assist employers and employees in:
- Reviewing pension contribution strategies to manage NIC exposure
- Advising on the design and communication of salary sacrifice arrangements
- Ensuring compliance with HMRC guidance once published
- Supporting broader reward and benefits planning to balance tax efficiency with employee engagement
