Pension salary sacrifice: what’s changing and what do I need to do?

9 Feb 2026

Sweeping changes to salary sacrifice pension rules will hit both employers and pension savers but are there any ways to mitigate the tax hit? Andrew Timpson, employment tax partner, and Aimee Pain, assistant manager at RSM, consider the impact of the new £2,000 limit

Currently, where pension contributions are made under a salary sacrifice arrangement, these are exempt from national insurance contributions (NIC), but this will change in future. So, what’s changing, and how will people need to prepare?

In the 2025 Budget, the government announced that from April 2029 onwards, only the first £2,000 of an employee’s salary sacrifice pension contributions will be exempt from NICs in each tax year.

Where salary is sacrificed over this £2,000, the extra contributions will be subject to both Class 1 primary and secondary NICs. Pension contributions will continue to be exempt from income tax, including those exceeding the £2,000 NIC relief cap.

How will this affect employees?