The end of “unlimited” NIC-free salary sacrifice
Salary sacrifice has long been a favourite planning tool:
- You cut your salary
- Your company pays the equivalent into your pension
- You save both income tax and NIC
From 6 April 2029, that changes. Employee and employer NICs will apply on salary-sacrificed pension contributions over £2,000 per year.
Why this matters to owners and high earners
If you’re a small business owner who:
- Sacrifices a large part of your salary into your pension, or
- Runs an attractive pension sacrifice scheme for staff,
the NIC saving will be capped.
This doesn’t kill salary sacrifice, but it does limit how powerful it is.
What you should be thinking about now
- Long-term remuneration strategies
- Succession and exit planning (which often includes heavy pension funding)
How you position your benefits package to key staff
Action steps
- Audit all current salary sacrifice arrangements
Identify who is contributing over (or close to) £2,000 per year via sacrifice. - Run 2029-onward projections
Ask your accountant or adviser to show the before vs after NIC cost for you and your team. - Consider alternative ways to reward key people
EMI options, bonuses, profit share or company-funded pensions (without salary sacrifice) may become relatively more attractive. - Communicate well ahead of time
For staff affected, the more notice and explanation you give, the better.
How can we help at MDH
Book a quick tax chat with me, no strings attached. We’ll have a look at your situation and spot opportunities you might be missing. And as a thank-you, I’ll send you a free copy of our book 75 Ways to Pay Less Tax, packed with simple, practical tips you can put to work straight away. Let’s make sure your money’s working smarter, not harder.
