Pension salary sacrifice changes from April 2029: only the first £2,000 sacrificed each year stays free of National Insurance, and an Act backs this.

The change is narrower than it may sound. Salary sacrifice into a pension is not ending, and Income Tax relief on pension contributions is not changing. What changes is the National Insurance exemption on pay you give up, and only for amounts above £2,000 in a tax year. This page sets out what HM Treasury and HMRC published, what the Act of Parliament says and who is likely to feel it. If your own pay and contributions leave the picture unclear, ask an FCA-authorised adviser to compare your sacrifice with the 2029 limit on a free call-back, which salary sacrificers can book with the form on this page.

What are the pension salary sacrifice changes?

HM Treasury published guidance on GOV.UK on 26 November 2025, and its publication page says the change was announced at Autumn Budget 2025. The guidance begins: "The government is changing how salary sacrifice for pension contributions works. From April 2029, the amount that is exempt from National Insurance contributions (NICs) will be capped at £2,000 a year for employee contributions made via salary sacrifice."

Above the line, employees and employers can still sacrifice more, but both pay National Insurance on the excess, as they would on other employee workplace pension contributions. HMRC's separate paper, published on 4 December 2025, gives the exact start: "The measure will take effect from 6 April 2029."

Salary sacrifice means agreeing to give up part of your gross pay or a bonus so that your employer pays the same amount into your pension. If you are unsure whether your own scheme works that way, the guide to net pay, relief at source and salary sacrifice shows the differences.

Is the National Insurance cap law yet?

The principle is law; the working detail is still to come from regulations. The National Insurance Contributions (Employer Pensions Contributions) Act 2026 (2026 c. 15) is dated 29 April 2026, the day of Royal Assent. Section 1 adds a power to the Social Security Contributions and Benefits Act 1992 to treat salary given up for certain employer pension contributions as earnings, and says that regulations must exempt amounts up to the contributions limit for a tax year.

Two further points in section 1 answer the question about dates. Its amendments "have effect for the tax year 2029-30 and subsequent tax years", and the first regulations must set the contributions limit at £2,000 for a tax year, with room for provision such as equivalents for people paid weekly or at other intervals.

So the cap has a statutory footing, but the Act does not set out how the limit will run in practice. HMRC's paper says: "Details on the design and operation of the £2,000 contribution limit will be set out in secondary legislation in due course, following stakeholder engagement." The Treasury adds that further guidance will be published on GOV.UK before April 2029. Because regulations and guidance can alter the day-to-day workings, check GOV.UK for the latest before relying on any summary, this one included.

Salary sacrifice cap timeline

DateWhat the official source says
26 November 2025Autumn Budget 2025; HM Treasury publishes guidance on the cap.
4 December 2025HMRC publishes its paper on the reform, with an operative date of 6 April 2029.
29 April 2026The 2026 Act is dated this day; section 1 is in force at Royal Assent.
Before April 2029Further GOV.UK guidance due, says HM Treasury; HMRC says design details will follow in secondary legislation in due course.
6 April 2029Start date of the cap, the first day of the 2029-30 tax year.

Legislation.gov.uk's commencement note reads "in force at Royal Assent" for section 1, yet the amendments only take effect for 2029-30 onwards. Nothing in the Act or the papers changes what you pay before then.

How does the change work in the National Insurance rules?

HMRC describes the measure as removing an exemption, and only for one tax. It "removes the OpRA excluded exemption for employer pension contributions for Class 1 National Insurance contributions only, where salary sacrifice arrangements exceed the £2,000 contribution limit." OpRA stands for optional remuneration arrangements, the legal term for salary sacrifice. Anything sacrificed above the limit then attracts Class 1 primary National Insurance for the employee and Class 1 secondary National Insurance for the employer.

The paper sets this against some history. Most other salary sacrifice opportunities were closed in 2017, while pensions stayed. It also reminds readers that the arrangement is only available where an employer offers it, and is not allowed if it would take an employee's pay below the National Minimum Wage. The limit applies per tax year, which is why the Act talks of a limit "for a tax year".

Who does the salary sacrifice cap affect?

HMRC's December 2025 paper estimates that about 7.7 million employees make pension contributions by salary sacrifice, and that 3.3 million of them give up more than £2,000 of salary or bonuses. In its words, that "means 44% of employees using salary sacrifice for pensions would be impacted by this measure, while 56% around 4.3 million people are fully protected by the £2,000 threshold."

The Treasury frames it differently: "Most employees making typical contributions will not be affected." Both can be true, because the people affected are those sacrificing more than the typical amount. HMRC says higher earners or those making larger contributions will pay National Insurance on the excess above the limit. For people above the limit, it estimates the average extra employee National Insurance at £84 in the first year of impact, tax year 2029 to 2030. That is an average, not a figure for any one person, and HMRC notes that some people may reduce what they sacrifice to limit the effect.

Employers are affected too. HMRC expects a significant impact on 290,000 employers that run pension salary sacrifice, which will need to account for the relevant amounts and pay Class 1 National Insurance where it applies. The Treasury says employers will report the total sacrificed through their existing payroll software.

Whether the extra National Insurance outweighs the other effects of salary sacrifice is a different question, which the guide to whether pension salary sacrifice is worth it works through. How the £2,000 sits beside other ceilings is in how much you can sacrifice.

What is not changing?

Income Tax comes first. The Treasury says "contributions through salary sacrifice, like all pension contributions, will still be exempt from Income Tax (subject to the usual limits)", and that employees can still pay in as much as they like, including by salary sacrifice. HMRC says Income Tax relief on employee and employer pension contributions remains unchanged, and the annual allowance is a separate limit on tax-relieved saving.

The Treasury also covers people who sacrifice salary to stay eligible for childcare support or Child Benefit: "Employees who choose to sacrifice salary to receive Tax Free Childcare or Child Benefit can keep doing so. However, any pension contributions above £2,000 will be subject to employer and employee NICs." HMRC adds that the reform leaves unchanged the effect of salary sacrifice on adjusted net income, which matters for Tax-Free Childcare and the Personal Allowance taper. If your pay sits close to those thresholds, ask for a free call-back about the Personal Allowance taper and childcare through the form on this page.

Employer contributions paid the ordinary way are untouched: "All employer pension contributions will continue to be free of NICs." For how those payments are treated generally, see employer pension contributions and tax.

Why is the government capping it?

HMRC says the cost of the relief rose from £2.8 billion in forgone National Insurance in tax year 2016 to 2017 to £5.8 billion in 2023 to 2024, and that with no change it would nearly triple to £8 billion by 2030 to 2031. The Treasury's reasoning is that "the costs of relief through salary sacrifice relate disproportionately to pension contributions from those on higher incomes."

The £8 billion is HMRC's projection of what would happen with no change, not a measured cost.

What else do people ask about the salary sacrifice cap?

Is pension salary sacrifice being scrapped?

No. The Treasury says salary sacrifice arrangements for pensions can continue, with the first £2,000 of contributions per employee exempt from National Insurance. HMRC says everyone using it will retain some benefit.

Do I have to contact HMRC about the change?

The Treasury says employees will not need to contact HMRC, and that employers will make the necessary changes so that National Insurance applies to contributions above £2,000.

Can the £2,000 figure still move?

The Act says the first regulations must specify £2,000 for a tax year, subject to the provision on weekly or other equivalents. Whether regulations have been made, and what they say about operation, is worth checking on GOV.UK nearer the time. If you would like it explained against your own pay, an adviser can do that once you have asked through the form here.

Does the cap apply in Northern Ireland?

Yes. Section 1 of the Act extends to England and Wales and Scotland, and section 2 makes the same change to Northern Ireland's own 1992 contributions Act. Section 2 also has effect for 2029-30 onwards, also requires the first regulations to set the limit at £2,000, and legislation.gov.uk shows it as in force at Royal Assent.

When will my payslip show the change?

Not before the 2029-30 tax year. The Treasury says that from April 2029 the first £2,000 of contributions per employee will be exempt, and that employers will make the changes needed so that National Insurance applies above it. Your employer is the best first contact about how your own scheme will be run.

Can I still put more than £2,000 into my pension through salary sacrifice?

Yes. The Treasury says employees can still contribute as much as they want, including via salary sacrifice; only the National Insurance treatment above £2,000 changes. Whether salary sacrifice affects the annual allowance is a separate question.

Where to read the official papers

Pension tax relief more widely is in the pension tax relief guide and the pension tax overview. If you would like the 2029 limit set against your own payslip, there is a free call-back on offer: an FCA-authorised adviser rings once you have completed this page's form.