Autumn Budget FAQs

Salary sacrifice is an agreement with your employer to give up part of your salary in return for a non-cash benefit, like a pension contribution.

A pension contribution is seen as a non-cash benefit because you don’t directly get the money as part of your take-home pay. Instead, it goes straight into your pension, along with any contribution your employer makes. 

Saving towards your pension in this way can be tax efficient because it lowers your gross salary. That means you and your employer pay less National Insurance. 

From April 2029, if you sacrifice more than £2,000 of your salary into a pension each year, you and your employer will have to pay National Insurance on the extra amount – just like you do on your normal salary.

The changes only apply to pension contributions made via salary sacrifice. It does not affect income tax relief on pension contributions.

This change comes into effect in April 2029.

If you’re an employee and sacrifice more than £2,000 a year into your pension, you won’t need to contact HMRC to start paying National Insurance on the extra amount. 

If you’re an employer, you’ll need to make the necessary changes so that National Insurance applies to any contributions greater than £2,000 a year made via salary sacrifice.

If this change is going to affect you and you need advice on how it could impact your personal financial situation, we recommend speaking to a financial advisor.

You can usually find this information on your payslip or in your employment contract. 

If your payslip shows no personal pension deduction but your pension is still receiving contributions, this often means you are part of a salary sacrifice arrangement. Your HR or payroll team can confirm this and explain how you’re paying your contributions. You can also log in to your pension account to see how much you and your employer are paying in.

Yes, but you’ll need to agree this with your employer. That’s because salary sacrifice is part of your employment contract. If you opt out, your pension contributions will usually go back to being taken from your salary. If you want to change how much you contribute, ask your HR or payroll team about how to do that and any deadlines for making changes.

Salary sacrifice can be tax efficient because you don’t pay income tax or National Insurance on the money you put into your pension. Your employer also saves on National Insurance. Some employers pass those savings on to their employees’ pensions.

The exact benefit depends on your employer’s scheme, so it’s worth checking the details with them.

Salary sacrifice isn’t right for everyone. 

Because salary sacrifice lowers your contractual salary, it could affect some benefits based on the amount you’re paid – like life cover, statutory maternity or paternity pay, or redundancy pay. Mortgage or loan providers might also use your lower salary when assessing affordability. 

Your salary can’t go below the National Minimum Wage and rules can change over time, so it’s important to keep an eye on how this arrangement works for you.

They usually stay the same but can sometimes increase. That’s because your employer also saves on National Insurance. Some employers add this saving to your pension too.

Ask your employer how they handle this, so you can see exactly how much you’re getting. 

We don’t have confirmation on this yet. Details on the changes from the Budget are still being released, and we will update our guidance when we know more. 

The cap applies to everyone sacrificing more than £2,000 of their salary into their pension. It doesn’t apply to people sacrificing less than that and it doesn’t apply to people putting money into their pension in other ways.

For questions about your specific arrangement, contact your HR or payroll team.

This change will make no difference to your current pension pot. [MK1] [HM2] More generally, it’s always worth bearing in mind that your pension may be invested in stocks, shares, bonds and other investments. They’re linked to financial markets. As those markets fluctuate, the value of your investments can also go up or down.

A stocks and shares ISA is a type of individual savings account (ISA) that lets you invest your cash tax free up to a certain amount. 

Yes, you can still save into a cash ISA. If you’re aged 65 or over, the tax-free allowance for cash savings hasn’t changed – it’s still £20,000. If you’re aged 64 or below, you can only put £12,000 a year in tax free. That’s designed to encourage you to invest the other £8,000 in a stocks and shares ISA. 

The change to the cash ISA allowance in 2027 is the only ISA allowance change that will happen between now and 2031. All other ISA allowances will stay unchanged until 2031.

Investing in a stocks and shares ISA means you are investing in stocks, shares, bonds and other investments. Financial markets can fluctuate so, as with any investment, the value of the amount you’ve invested can go up or down.