Salary sacrifice from April 2029: the £2,000 National Insurance cap

Salary sacrifice is the most common way for parents near £100,000 to stay under the limit. From 6 April 2029 the rules change: only the first £2,000 a year of pension contributions made through salary sacrifice will be free of National Insurance.

What changes

• Pension salary sacrifice above £2,000 a year will have employee and employer National Insurance taken from it, as if it were paid as salary.
• It stays free of income tax.
• Your employer's own pension contributions stay free of National Insurance.
• You don't need to tell HMRC anything. Your employer's payroll deals with it.

It still keeps you under £100,000

The change is to National Insurance only. Salary you sacrifice into a pension is still free of income tax, so it still lowers your taxable pay and your adjusted net income pound for pound. It still works for keeping 30 funded hours and Tax-Free Childcare, and for getting out of the 60% tax trap.

What it costs you

Most people near £100,000 earn above the National Insurance upper earnings limit, where employee National Insurance is 2%. So on each £1,000 sacrificed above the first £2,000 you'd pay about £20 more. If you sacrifice £12,000 a year, that's about £200.

The bigger change is for employers, who pay 15% National Insurance. Some pass part of their saving on to your pension today; check whether yours will keep doing so after April 2029.

Does another method become better?

Usually not. Net pay and personal pensions never saved National Insurance, so salary sacrifice stays at least as good for income tax and adjusted net income, and still saves National Insurance on the first £2,000. How the three methods compare.

In Hundred Line

The planner applies the cap from the 2029/30 tax year. HMRC hasn't yet said exactly how payroll will handle it, so the planner spreads the National Insurance evenly across the year.

More guides

• How much pension to get under £100,000: calculator

  Work out how much more to pay into your pension to bring adjusted net income back to £100,000, and what it costs.

• 60% tax trap calculator

  See how much of your income is taxed at 60%, what the lost Personal Allowance costs and how much pension gets you out.

• The 60% tax trap between £100,000 and £125,140

  Why income between £100,000 and £125,140 is taxed at 60%, and how pension contributions get you out of it.

• Losing funded childcare at £100,000

  How 30 funded hours and Tax-Free Childcare stop when either parent goes over £100,000, and what stays.

• Salary sacrifice, net pay and relief at source

  The three ways pension contributions are made, and how each one lowers your adjusted net income.

• The High Income Child Benefit Charge

  How Child Benefit is clawed back between £60,000 and £80,000, and why you should still claim.

• What is adjusted net income?

  The income figure behind the £100,000 childcare limit, the Personal Allowance taper and the Child Benefit charge.

• Budget 2026: what it means for parents near £100,000

  What the 28 October 2026 Budget changed, and didn't, for families around the £100,000 childcare limit.

• Bonus season: sacrificing a bonus to stay under £100,000

  How to put part of a bonus into your pension so it doesn't push you over £100,000, and when to ask.

Sources

• Changes to salary sacrifice for pensions from April 2029 (HM Treasury)
• Rates and thresholds for employers 2026 to 2027 (GOV.UK)

Checked 31 October 2026 for England. This guide is general information, not financial advice.