When do the salary sacrifice changes start?

The change can start on 6 April 2029, through regulations made under the 2026 Act. Until then the current rules apply — salary-sacrificed pension contributions remain free of employee and employer National Insurance without the new £2,000 cap.

What is the £2,000 salary sacrifice cap?

From 6 April 2029, the first £2,000 a year of employee pension contributions made through salary sacrifice stays free of National Insurance; salary or bonus sacrificed above it attracts employee and employer NI. The Act fixes that framework, while regulations and payroll guidance still need to provide the operating detail.

Tax relief and salary sacrifice · Salary sacrifice

Salary sacrifice and the 2025 Budget: the National Insurance cap from April 2029

From 6 April 2029 only the first £2,000 a year of employee pension contributions through salary sacrifice is due to escape National Insurance. The Act is law, but the charge itself takes effect through implementing regulations, and the payroll guidance is still to come.

3 min read · Last reviewed 23 Sept 2026

— In short

The National Insurance Contributions (Employer Pensions Contributions) Act 2026 lets regulations, from 6 April 2029, bring salary-sacrificed employee pension contributions above £2,000 a year into employee and employer NI. The first regulations must fix the limit at exactly £2,000; later ones can reduce it with both Houses’ approval. Income-tax relief is unchanged, and genuine employer contributions outside salary sacrifice remain NIC-free.

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From 6 April 2029 only the first £2,000 a year of employee pension contributions made through salary sacrifice are due to remain free of National Insurance. The National Insurance Contributions (Employer Pensions Contributions) Act 2026 received Royal Assent on 29 April 2026; it sets the framework, the start year and the first £2,000 limit, and the charge itself will be brought in by regulations. The change touches National Insurance only: income-tax relief on pension contributions is unchanged.

What the Act does

The Act lets the Treasury make regulations, from the 2029-30 tax year, that treat salary or bonus sacrificed for employee pension contributions as earnings for employee and employer Class 1 National Insurance. Those regulations must leave the first £2,000 a year outside NI, and the first set must fix the limit at exactly £2,000. Later regulations can reduce it, but only with the approval of both Houses of Parliament. Contributions can still exceed £2,000, their income-tax treatment is unchanged, and genuine employer pension contributions made outside salary sacrifice remain free of National Insurance.

National Insurance Contributions (Employer Pensions Contributions) Act 2026 c.15, s.1 ( legislation.gov.uk); Royal Assent 29 April 2026.

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 happens before April 2029

Nothing changes before 6 April 2029. The primary legislation is final, but the charge itself takes effect through regulations, which will also set how the limit works across pay periods, and HMRC still has to publish the payroll and reporting guidance. The operating detail that affects existing arrangements will come in the regulations and guidance. Our salary sacrifice calculator models the current rules; we will update it when the operative payroll rules are final.

For how the saving works under today’s rules, see salary sacrifice for pensions, explained and salary sacrifice and National Insurance.

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Common questions

Is salary sacrifice being abolished?: No. The 2026 Act keeps salary sacrifice but, from 6 April 2029, limits the amount of employee pension contributions through salary sacrifice that is free of National Insurance to £2,000 a year. Income-tax relief is unaffected.
When do the salary sacrifice changes start?: The change can start on 6 April 2029, through regulations made under the 2026 Act. Until then the current rules apply — salary-sacrificed pension contributions remain free of employee and employer National Insurance without the new £2,000 cap.
What is the £2,000 salary sacrifice cap?: From 6 April 2029, the first £2,000 a year of employee pension contributions made through salary sacrifice stays free of National Insurance; salary or bonus sacrificed above it attracts employee and employer NI. The Act fixes that framework, while regulations and payroll guidance still need to provide the operating detail.

Sources

Based on the National Insurance Contributions (Employer Pensions Contributions) Act 2026 and HMRC’s “Changes to salary sacrifice for pensions from April 2029” guidance.

For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.