Salary Sacrifice Changes from April 2029

Salary Sacrifice Changes from April 2029 in the UK
In recent years, salary sacrifice pension contributions have become a widely used and tax efficient way to build retirement savings.
However, the Government has now confirmed changes that will take effect from 6 April 2029.
If you contribute to your workplace pension through salary sacrifice, or your employer offers this arrangement, it is important to understand what is changing and what is staying the same.
This article explains the confirmed position in clear and practical terms.

What Is Salary Sacrifice?

A salary sacrifice arrangement is an agreement between you and your employer.
You agree to reduce your contractual gross salary. In return, your employer pays that amount directly into your pension scheme as an employer contribution.
Because your official salary is lower, this can reduce the amount of Income Tax and National Insurance contributions ou pay. Employers may also save on National Insurance and sometimes add part or all of that saving into your pension.
For many employees, this structure has made pension contributions more efficient compared to paying from net income.

What Is Changing in April 2029?

From 6 April 2029, the Government will introduce a cap on the National Insurance advantages of salary sacrifice for pensions.
Under the new rules:

Gifts and the 7-Year Rule

‣ Only the first £2,000 per tax year of employee pension contributions made via salary sacrifice will be exempt from National Insurance contributions
‣ Any salary sacrifice pension contributions above £2,000 per year will attract National Insurance in the usual way
‣ Income tax relief on pension contributions remains unchanged, subject to existing pension rules such as the annual allowance

Importantly, salary sacrifice itself is not being abolished. You will still be able to use it. The change relates specifically to the National Insurance treatment above the £2,000 threshold.

What Does This Mean in Practice?

For employees who sacrifice up to £2,000 per year into their pension, the current National Insurance treatment will continue.
For those contributing more than £2,000 per year through salary sacrifice, the amount above that threshold will no longer benefit from National Insurance savings. Both employee and employer National Insurance will apply to that excess.
This means the overall tax efficiency of higher pension contributions through salary sacrificemay reduce after April 2029.
However, pension contributions can still receive income tax relief within the normal rules. The wider benefits of disciplined retirement saving remain unchanged.

Comparison table for the rule change

Comparison table for the rule change

Should You Change Anything Now?

There is no requirement to make immediate changes purely because of the 2029 reform.

When reviewing your retirement planning strategy, it is sensible to consider:

‣ The level of your current pension contributions
‣ Whether you contribute more than £2,000 per year via salary sacrifice
‣ How pension savings fit into your broader financial goals
‣ The potential impact on take home pay in future

Financial planning works best when it is structured and aligned with your long term objectives rather than driven by short term headlines.

The 2029 change is confirmed, but it is still several years away. That provides time to review your arrangements calmly and make informed decisions where appropriate.

The Bigger Picture

Even with the new National Insurance cap, pensions remain one of the most tax efficient ways to save for retirement in the United Kingdom.
Income tax relief, employer contributions and long term investment growth continue to make pension planning a central part of building financial security.
Understanding how policy changes affect you personally is key. The right course of action will depend on your income level, contribution rate and wider financial position.
If you are unsure how the April 2029 change may affect you, seeking regulated financial advice can provide clarity.

Important information

This article is for general information only and does not constitute financial advice. Pension and tax rules can change and their impact will depend on individual circumstances. Zomi Wealth is authorised and regulated by the Financial Conduct Authority. When investing, your capital is at risk and you may get back less than you invest.

Sources

https://www.gov.uk/government/publications/changes-to-salary-sacrifice-for-pensions-from-april-2029/changes-to-salary-sacrifice-for-pensions-from-april-2029
https://obr.uk/efo/economic-and-fiscal-outlook-november-2025/
https://commonslibrary.parliament.uk/research-briefings/cbp-10423/
https://www.thepensionsregulator.gov.uk/en/document-library/automatic-enrolment-detailed-guidance/4-pension-schemes-under-the-employer-duties
https://www.pensionsuk.org.uk/news/article/pension-pots-sacrificed-by-2029-salary-reforms-nearly-half-of-uk-savers-fear-smaller-pension-pots-under-new-rules-

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