Salary sacrifice:
the 2029 changes.

At the Autumn Budget 2025 the government announced a change to the way pension salary sacrifice is treated for National Insurance, taking effect from April 2029. It is a genuine change, but it is neither sudden nor as sweeping as some headlines suggested. For most employees on typical pension contributions, the saving continues. It is larger sacrifices and very generous schemes that are affected. This page explains what is changing, when, who it touches and what to do about it, without the scare stories. It sits under our salary sacrifice service, and we will handle the practical side for the payrolls we run.

This page is part of our wider salary sacrifice service, and it focuses on pensions, which is where the change lands. For how pension salary sacrifice works today, see our pension page.

What is changing

Today, when an employee sacrifices salary into their pension, that sacrificed pay is free of both income tax and National Insurance. From April 2029, the National Insurance part of that advantage is being limited. Pension contributions made through salary sacrifice will keep their National Insurance exemption up to a set yearly amount. Anything sacrificed above that amount in a year will be treated like ordinary earnings for National Insurance, so both the employee and the employer will pay National Insurance on the excess.

In short, salary sacrifice into a pension is not being abolished. The National Insurance saving is being capped, so it continues in full on modest contributions and is reduced only on the part of a large sacrifice above the yearly threshold.

When it takes effect

The change is due to start in April 2029. That long lead time is deliberate, giving employers and employees several years to plan and, where it makes sense, adjust how contributions are structured. Nothing changes before then. The exact threshold and the fine detail will be set out in legislation nearer the time, which is why it pays to keep an eye on it rather than react now.

Who it affects

• Most employees: little or no change. Anyone sacrificing a typical amount into their pension stays under the yearly limit and keeps the full saving.
• Large sacrifices: some National Insurance to pay. Higher earners and anyone making big pension sacrifices will pay National Insurance on the part above the limit.
• Generous employers: a cost to model. Businesses that run generous salary sacrifice pension schemes, or that pass on their employer National Insurance saving, will want to model the effect before 2029.

What is not changing

It is worth being clear about what stays the same, because the headlines blurred it:

• Income tax relief on pensions is unaffected. Pension contributions still receive income tax relief in the usual way.
• The saving below the limit continues. Modest sacrifices keep their full National Insurance advantage.
• Other salary sacrifice schemes are not the target. The announcement is about pensions. We will flag clearly if anything changes for car or cycle to work schemes.

What employers should do now

There is no need to change anything today, but there is sense in getting ready:

• Know where your staff sit. Identify anyone making large pension sacrifices who might cross the future limit.
• Model the cost. If you run a generous scheme, work out what the change could cost from 2029 so there are no surprises.
• Keep your scheme documented properly. Whatever the rules, a valid sacrifice still needs a proper contractual variation, which we keep in order.

How we will handle it

Keeping up with tax and National Insurance changes is our job, not yours. For the payrolls we run, we will apply the new treatment correctly when it starts, flag any staff it affects ahead of time, and help you decide whether to adjust how contributions are set up. We are a South Wales payroll bureau with more than 60 years of combined experience, CIPP members and Chartered Accountants (ICAEW). If you want your salary sacrifice reviewed before 2029,talk to us about your payroll or see our pricing.