Could you benefit from salary sacrifice?

Salary sacrifice is a way of boosting your pension savings while potentially paying less tax and National Insurance.

Salary sacrifice (sometimes called salary exchange) is an arrangement between you and your employer where you agree to give up part of your salary. In return, your employer contributes that amount directly into your pension scheme. Because this contribution is made before tax and National Insurance are calculated, both you and your employer can benefit from savings.

For example, if you sacrifice £100 of salary each month, your employer pays that £100 into your pension. You avoid paying Income Tax and National Insurance on that amount, and your employer saves on their National Insurance contributions too.

It’s important to understand whether Salary Sacrifice is right for you and your personal circumstances. A lower salary might impact your entitlement to benefits like Statutory Maternity Pay or the State Pension.

You can find out more on the Money Helper website: www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/salary-sacrifice-and-your-pension

In November the government announced its latest Budget, this included some changes to Salary Sacrifice which are due to come into effect in April 2029. These changes include:

• You will pay NI on any salary sacrificed above £2,000 (8% for most people, 2% for higher-rate taxpayers).
• The first £2,000 of salary sacrifice each year remains NI-free.
• Employers will also pay NI on amounts above £2,000.
• No changes to tax relief, Annual Allowance or tax-free lump sums.
• Income tax thresholds remain frozen until April 2031.
• Tax relief still applies to all contributions - this is not changing.

For further information you can go to the government website: www.gov.uk/government/publications/changes-to-salary-sacrifice-for-pensions-from-april-2029/changes-to-salary-sacrifice-for-pensions-from-april-2029