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Salary sacrifice and the 2025 Budget: the National Insurance cap from April 2029
From April 2029 the government plans to cap the salary-sacrificed pension contributions that escape National Insurance. The measure was announced at the 2025 Budget and has not yet been legislated.
Based on the Autumn Budget 2025 announcement. This is a proposed measure; figures and timing are subject to the final legislation.
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From April 2029 the government intends to cap the pension contribution that can be made by salary sacrifice free of National Insurance, announced at the 2025 Budget. The change touches National Insurance only; income tax relief on pension contributions is untouched. At the time of writing it remains an announced proposal, not enacted legislation.
What was announced
An annual cap, widely quoted at £2,000 of sacrificed pension contributions a year, would stay free of National Insurance. Sacrifice above the cap would attract both employee and employer National Insurance, as ordinary earnings do. The income tax position is unchanged: contributions still receive relief in the normal way. The stated start date is April 2029, a long lead time.
Autumn Budget 2025 (HM Treasury). Proposed measure — subject to legislation.
Who it affects
For most employees sacrificing modest amounts, a £2,000 NI-free allowance covers the whole contribution, so nothing changes. The measure bites on larger sacrifices — higher earners directing significant sums to a pension, and the employers who currently save 15% secondary National Insurance on those amounts. Even then, only the National Insurance advantage above the cap is lost. The income tax relief, and the effect on adjusted net income, remain.
What to do now
Nothing changes before April 2029, and the detail can still shift as the measure is legislated. Keep using salary sacrifice where it is efficient today, and revisit the larger arrangements once the legislation is final. Our salary sacrifice calculator models the current rules; we will update it when the cap is law.
For how the saving works under today’s rules, see salary sacrifice for pensions, explained and salary sacrifice and National Insurance.
Common questions
- Is salary sacrifice being abolished?
- No. The 2025 Budget announced a cap, from April 2029, on the amount of pension salary sacrifice that is free of National Insurance — reported as £2,000 a year. Income tax relief is unaffected, and the measure is a proposal that has not yet been legislated.
- When do the salary sacrifice changes start?
- The announced start date is April 2029. Until then the current rules apply — salary-sacrificed pension contributions remain free of employee and employer National Insurance without a cap.
- What is the £2,000 salary sacrifice cap?
- As announced at the 2025 Budget, up to £2,000 of salary-sacrificed pension contributions a year would stay free of National Insurance from April 2029; sacrifice above that would attract employee and employer NI. The figure and detail are subject to the final legislation.
Sources & grounding
- ANNOUNCED MEASURE — NOT YET LEGISLATED. Source: Autumn Budget 2025 (HM Treasury) and the accompanying HMRC policy documents. Operator to re-verify the exact cap (£2,000 per year, reported) and the 6 April 2029 start date against the final legislation before publishing this article.
- Current NI treatment (the baseline being changed): SSCBA 1992 s.8/s.9 — salary-sacrificed pension contributions are currently free of both employee and employer National Insurance without limit.
For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.