Salary Sacrifice £2,000 NI Cap from April 2029
Written by James Whitfield · Updated October 2026 · Checked against GOV.UK guidance.
From April 2029, only the first £2,000 a year of pension contributions made through salary sacrifice will be free of National Insurance. Anything you sacrifice into your pension above £2,000 will attract employee and employer National Insurance, the same as an ordinary employee pension contribution. Income Tax relief does not change, and nothing changes for 2026/27.1
- Starts April 2029: pension salary sacrifice above £2,000 a year becomes subject to employee and employer NI.1
- The first £2,000 stays NI-free, so small sacrifices are unaffected.1
- Income Tax relief is unchanged: the whole sacrifice still comes out of your taxable pay.1
- Ordinary employer contributions on top of salary stay NI-free.1
- For 2026/27 the full sacrifice still saves 8% or 2% employee NI and 15% employer NI.2
What changes, and what doesn't
Today a pension salary sacrifice cuts your pay before both Income Tax and National Insurance, so you save NI at 8% (or 2% above £50,270) and your employer saves 15%. From April 2029 the NI saving will be limited to the first £2,000 sacrificed each year. Contributions above that will be treated for National Insurance like other employee workplace pension contributions, which are paid out of pay that has already had NI taken off.1
Income Tax is unaffected: sacrificed contributions stay exempt from Income Tax within the usual annual allowance. Employer pension contributions that are not funded by giving up salary stay completely free of NI.1
Worked examples at today's NI rates
| £30,000 salary, 5% sacrifice (£1,500) | No change |
| £40,000 salary, £4,000 sacrifice: £2,000 over the limit at 8% | £160 employee · £300 employer |
| £60,000 salary, £6,000 sacrifice: £4,000 over, at 2% (above £50,270) | £80 employee · £600 employer |
| £100,000 salary, £15,000 sacrifice: £13,000 over, at 2% | £260 employee · £1,950 employer |
Extra NI a year once the cap applies, using 2026/27 rates for illustration. The £100,000 example is someone sacrificing to keep income below the £100,000 Personal Allowance taper; their Income Tax saving is not affected.
The bigger effect for many people may be on the employer side. If your employer currently passes some of its 15% NI saving into your pension, it will save less on sacrifices above £2,000 from 2029 and may reduce or stop that top-up. It is worth asking HR how they plan to handle it.
Who is most affected
- Basic-rate earners sacrificing more than £2,000: they lose 8% NI on the excess, more than higher earners, who lose 2%.
- People who sacrifice bonuses into their pension: a one-off £10,000 bonus sacrifice would have £8,000 above the limit in that year.
- Employees whose employer shares its NI saving: the extra employer contribution may shrink.
- People sacrificing under about £2,000 a year (roughly 5% of a £40,000 salary) are not affected.
What to do now
Nothing changes until April 2029, so for 2026/27 salary sacrifice is still the most efficient way for most employees to pay into a workplace pension. Use the salary sacrifice calculator to see this year's Income Tax and NI saving, and compare it with relief at source and net pay. If you plan large one-off sacrifices, such as bonus sacrifice, the three tax years before the change are when the full NI saving is still available.
Frequently asked questions
What is the salary sacrifice £2,000 cap from April 2029?
From April 2029, only the first £2,000 a year of pension contributions made through salary sacrifice will be free of National Insurance. Sacrificed pension contributions above £2,000 will be subject to employee and employer National Insurance, like ordinary employee pension contributions. They will still be free of Income Tax.
Does the 2029 change affect income tax relief on salary sacrifice?
No. Salary-sacrificed pension contributions stay exempt from Income Tax, within the usual annual allowance limits. Only the National Insurance treatment of the amount above £2,000 changes.
Does the 2029 change affect 2026/27?
No. For 2026/27 and the next two tax years, the whole of a pension salary sacrifice saves employee National Insurance (8% or 2%) and employer National Insurance (15%). The change is due to start in April 2029.
Are normal employer pension contributions affected?
No. Contributions an employer makes on top of your salary stay free of National Insurance. The £2,000 limit applies to contributions you fund by giving up salary.
How much more will I pay after April 2029?
At today's rates, on the amount you sacrifice above £2,000 you would pay 8% employee NI if your salary is in the main band (up to £50,270) or 2% above it, and your employer would pay 15%. Someone earning £40,000 who sacrifices £4,000 would pay about £160 more a year, and their employer about £300 more.
This guide is for general information only. It does not constitute financial, tax or legal advice. The 2029 change was announced by the government; the final legislation and NI rates for 2029/30 may differ.
Sources & references
Every headline figure in this guide is checked against the official HMRC and GOV.UK pages below and reflects the confirmed 2026/27 tax year. Each link opens the relevant official page in a new tab.
- Changes to salary sacrifice for pensions from April 2029 ↗ https://www.gov.uk/government/publications/changes-to-salary-sacrifice-for-pensions-from-april-2029/changes-to-salary-sacrifice-for-pensions-from-april-2029
- National Insurance rates and categories ↗ https://www.gov.uk/national-insurance-rates-letters
- Salary sacrifice and the effects on PAYE (HMRC) ↗ https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye