5 min read. Last verified 22 June 2026. 2026/27 rules.
The short answer
From 6 April 2029, only the first £2,000 a year of pension salary sacrifice stays free of employee National Insurance. Anything sacrificed above that is added back to your NIable pay, taxed at your marginal NI rate, typically 2% for higher earners above the upper earnings limit.
Key facts
›The cap takes effect from 6 April 2029 (future policy, not yet in force).
›Only the first £2,000 a year of salary sacrifice stays NI-exempt.
›Amounts above £2,000 are taxed at the marginal employee NI rate, typically 2% above the upper earnings limit.
›Income tax relief on salary sacrifice is unaffected; only the NI advantage is capped.
Salary sacrifice into a pension currently escapes employee National Insurance entirely. From 6 April 2029 that changes for larger contributions.
What changes
Only the first £2,000 a year of pension salary sacrifice will remain free of employee National Insurance. Anything above that is added back to your NIable pay and charged at your marginal NI rate, which for most high earners above the upper earnings limit is 2%.
What it could cost
If you sacrifice £20,000 a year, £18,000 of that becomes NIable from 2029. At 2% that is around £360 a year of extra employee National Insurance. Larger sacrifices, or earners still in the 8% band, can see more.
Common questions
When does the £2,000 salary-sacrifice NI cap start?
From 6 April 2029. It is confirmed future policy from the Autumn Budget 2025 and the NIC (Employer Pensions Contributions) Bill, not a current 2026/27 rule.
Does the cap remove the tax benefit of salary sacrifice?
No. Income tax relief on the full sacrificed amount continues. Only the National Insurance exemption above £2,000 a year is removed.
Figures verified against gov.uk and gov.scot on 30 June 2026. Constants version 2026/27.3. 2026/27 tax year. This is a modelling tool for general insight, not financial or tax advice.
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