Salary sacrifice cap calculator

Today, salary sacrifice (HMRC calls it an “optional remuneration arrangement”) saves National Insurance on every pound you give up. You swap salary for an employer pension contribution, and because it’s no longer salary, neither you nor your employer pays NI on it.

From the 2029-30 tax year, that only holds for the first £2,000 you sacrifice each year. Anything above it is treated as earnings for National Insurance, both yours (Class 1 primary) and your employer’s (Class 1 secondary). For income tax, the whole sacrifice still counts as a pension contribution, exactly as now.

The limit is set in the National Insurance Contributions (Employer Pensions Contributions) Act 2026. The Lords tried to raise it to £5,000 and the Commons overturned that. Future regulations can lower the £2,000, but only with Parliament’s approval, and nothing ties it to inflation.

The government estimates 7.7 million employees use salary sacrifice for their pension, and 3.3 million (44%) sacrifice more than £2,000 a year. The other 4.3 million are fully protected. If you sacrifice £167 a month or less, nothing changes for you.

The average extra cost to employees is about £84 a year. That sounds low because many people affected earn over £50,270, where the extra NI is only 2%. Most of the cost lands on employers, which matters more than it looks (see below).

The extra NI is the difference between NI on your pay plus everything above £2,000 and NI on your pay after the full sacrifice. The last column shows the pension you’d lose if your employer currently adds all of its NI saving to your pot. Above the cap there is no saving left to share.

Look at the £55,000 example. After a £6,000 sacrifice, pay is £49,000, below the £50,270 upper earnings limit. Adding back the £4,000 above the cap takes it to £53,000, so the slice is charged partly at 8% and partly at 2%: £156, not the £320 a flat 8% would give.

The £60,000, 8% sacrificed example shows why the employer top-up matters. The extra NI is only £56 a year. But if the employer currently passes all of its saving into the pension, that pension gets £420 a year less, so the total hit is £476.

Almost always, yes. The fairest test is how much take-home pay you give up for each £1 that lands in your pension. Before April 2029 and after it:

The cap makes saving through sacrifice a few pence dearer. It doesn’t make it a bad deal. Above the £2,000, a sacrificed pound gets the same NI treatment as a personal contribution, but sacrifice still has advantages:

• Relief at your top rate of income tax happens automatically. With a personal pension, higher-rate relief has to be claimed.
• It lowers your adjusted net income, which keeps you under £100,000 (where the personal allowance tapers, an effective 60% tax rate) or £60,000 (where the child benefit charge starts).
• On the first £2,000 your employer still saves 15%, and some will keep sharing that with you.

The usual downsides of a lower contractual salary are unchanged. Some statutory payments, life cover multiples and mortgage applications are based on your post-sacrifice pay. Sacrifice also can’t take your pay below the National Minimum Wage.

For employers the cap is 15% on every pound sacrificed above £2,000, against your 2–8%. The government puts the total at around £4.8 billion in 2029-30. Expect schemes to change before then. Watch for:

• Ending NI pass-back. If your employer adds its NI saving to your pension, that top-up can only continue on the first £2,000. The calculator shows what that costs you, and what it adds up to by retirement.
• Paying contributions directly. Employer contributions that aren’t made by sacrifice stay NI-free. Some employers may restructure pay to use them, though the detail will depend on the regulations.
• Capping sacrifice at £2,000. If yours does, the rest of your saving would have to go in another way. The calculator’s “keep take-home the same” figure shows the trade-off.

The Act sets the £2,000 and the start date. Regulations still need to settle:

• whether the £2,000 is per job or per person, if you have more than one employer
• how it works through payroll when sacrifice varies month to month or comes as a bonus
• any anti-avoidance rules on restructuring pay into direct employer contributions

No draft regulations had been published when we last checked (14 October 2026). We check the rules weekly and log every change on our rule updates page.

A few hundred pounds a year matters less than whether your savings get you to the retirement you want. If the cap makes you change how much you save, run the new figure through the free retirement planner. It models salary sacrifice, the April 2029 change and the rise in pension access age to 57, year by year. Or see when you can afford to retire.