Salary sacrifice cap announcement from the budget

brumbill

I’ve been following the budget leaks and suggestions for the past few weeks and the announcements today and I’m looking for some clarity.

is the cap on salary sacrifice levels before NI contributions kick in targeted only at pension contributions or at ALL salary sacrifice elements? I’m currently in the process of applying for a salary sacrifice EV, but already (before even receiving g the car) there are levy’s due to increase in April 26 and 27 based on the value of the car, and the additional
mileage levy now coming in from 2028. It’s essentially increases the cost by about 12-15%, all whilst net income is already going down, so makes a huge difference.

i was also looking at a bike sacrifice scheme.

does the salary sacrifice cap only apply to pensions or is it a limit across a total of any scheme you sign up to?

addtionally, is the cap just for NI payments? I’m also looking to keep income down to avoid repaying child benefit, largely because of the immense faff it seems to be to calculate paying it back. Does anything above the threshold still count as a salary sacrifice, you just don’t get the NI reduction benefit?

thanks very much (and apologies if not being clear!)

BrimfulofSascha

As far as I am aware the details have not been released yet, but the headlines state pension salary sacrifice and do not mention other schemes. It's also important to point out that this does not come into play until April 2029, so future tax years only, therefore no payback required

brumbill

Thank you very much 

it’s a very confusing mess of changes but I find anything that discourages people paying into private pensions absolute crazy when there won’t be enough to fund state pensions in years to come 

Albermarle

brumbill said:

Thank you very much 

it’s a very confusing mess of changes but I find anything that discourages people paying into private pensions absolute crazy when there won’t be enough to fund state pensions in years to come 

Only one third of private sector employees and only 10% of public sector benefit from avoiding paying some NI by using salary sacrifice. Many employers do not operate the scheme. Minimum wage employees and the self employed can not benefit from it either.
So it is basically a loophole that mainly benefits the better paid/those making a high level of pension contributions.
I benefitted from it but always thought it just seemed like a tax dodge.

eskbanker

The cap solely relates to the NI relief on pension contributions via salary sacrifice:

4.120 Salary sacrifice for pension contributions – The government will charge employer and employee NICs on pension contributions above £2,000 per annum made via salary sacrifice. These changes will be legislated for through primary and secondary legislation which will be introduced in due course. This will take effect from 6 April 2029.

https://assets.publishing.service.gov.uk/media/6926eb102a37784b16ecf525/E03444720_Budget_2025_Web_Accessible.pdf

https://forums.moneysavingexpert.com/discussion/6642393/can-someone-please-explain-what-the-2k-threshold-and-ni-contributions-change-means

Eldi_Dos

Albermarle said:

brumbill said:

Thank you very much 

it’s a very confusing mess of changes but I find anything that discourages people paying into private pensions absolute crazy when there won’t be enough to fund state pensions in years to come 

Only one third of private sector employees and only 10% of public sector benefit from avoiding paying some NI by using salary sacrifice. Many employers do not operate the scheme. Minimum wage employees and the self employed can not benefit from it either.
So it is basically a loophole that mainly benefits the better paid/those making a high level of pension contributions.
I benefitted from it but always thought it just seemed like a tax dodge.

Like you I benefitted and always thought it was a loophole that would be closed, rather than a policy that was meant to be implemented across the board.
When it was offered to us at first we were given the option to take it or not and a couple of guys decided not to take it up as they felt it was a loophole that might come back and bite them.

Edit ;  A couple of these guys followed football closely and were the first ones I ever heard mention EBT's

brumbill

Albermarle said:

brumbill said:

Thank you very much 

it’s a very confusing mess of changes but I find anything that discourages people paying into private pensions absolute crazy when there won’t be enough to fund state pensions in years to come 

Only one third of private sector employees and only 10% of public sector benefit from avoiding paying some NI by using salary sacrifice. Many employers do not operate the scheme. Minimum wage employees and the self employed can not benefit from it either.
So it is basically a loophole that mainly benefits the better paid/those making a high level of pension contributions.
I benefitted from it but always thought it just seemed like a tax dodge.

Thanks for this

if Im completely honest, I’m not sure how my company does it - the way pensions levels are calculated and fluctuations with the amount of tax paid seems to be totally random when you change your contribution so I can never work out what my take home would be if a change my contribution levels.

honestly I was more concerned with the other salary sacrifice elements as an EV is only affordable if the cost comes out at that point, despite the BIK tax

Jeremy535897

Pensions only. Still exempt from income tax. No sign of the threatened cap regarding expensive cycles.
https://www.gov.uk/government/publications/changes-to-salary-sacrifice-for-pensions-from-april-2029/changes-to-salary-sacrifice-for-pensions-from-april-2029

monkey-fingers

Albermarle said:

brumbill said:

Thank you very much 

it’s a very confusing mess of changes but I find anything that discourages people paying into private pensions absolute crazy when there won’t be enough to fund state pensions in years to come 

Only one third of private sector employees and only 10% of public sector benefit from avoiding paying some NI by using salary sacrifice. Many employers do not operate the scheme. Minimum wage employees and the self employed can not benefit from it either.
So it is basically a loophole that mainly benefits the better paid/those making a high level of pension contributions.
I benefitted from it but always thought it just seemed like a tax dodge.

Sorry, self-employed can't?

Nothing changes for me, what with running a ltd company with me as the only employee.
Still avoiding NI thanks.

Dazed_and_C0nfused

monkey-fingers said:

Albermarle said:

brumbill said:

Thank you very much 

it’s a very confusing mess of changes but I find anything that discourages people paying into private pensions absolute crazy when there won’t be enough to fund state pensions in years to come 

Only one third of private sector employees and only 10% of public sector benefit from avoiding paying some NI by using salary sacrifice. Many employers do not operate the scheme. Minimum wage employees and the self employed can not benefit from it either.
So it is basically a loophole that mainly benefits the better paid/those making a high level of pension contributions.
I benefitted from it but always thought it just seemed like a tax dodge.

Sorry, self-employed can't?

Nothing changes for me, what with running a ltd company with me as the only employee.
Still avoiding NI thanks.

Correct, people who are self employed will have to use relief at source method*

*assuming they don't have an old pre 1990 retirement annuity contract.

SpeedSouth

I've read a couple of guides, but confused over exactly what it would mean.

What I understood, is that any contributions over £2,000 into your pension will be subject to NIC.

So if you are a 20% tax payer you'd pay 12% of any contributions over that would you?  So an extra £1,000 into your pension would cost your £680 rather than the £800 it currently does?

As a 40% payer, that extra £1000, would cost you £580 currently?

So if you are flirting with the 40% bracket would it make sense to sit as a 40% tax payer to reduce the nominal?  I like others have said sacrifice a lot to the scheme to drop under 40%.

In the example £30,000 goes into your pension on a salary, £2,000 is not subject to any NI but the remaining £28,000 would be.

So if you tweaked your % so that your P60 had an amount earned of £51,000 would you only pay 2% or £560 on that £28,000.  In this example you'd be subject to 40% on the £730 above the threshold, so an extra 20% or £145.80 on over being a 20% payer. 

Whereas if you had contributed £29,000 and dropped to a lower rate tax payer on £50,000 you'd see a 12% or £3480 cut on that whole contribution.

Seems wild if that would be the case, of course I realise there are other implications on being a 40% payer, but for me the difference is PSA would not outstrip this potential workaround to the closing loophole