Salary sacrifice pension contributions above £2,000 will face National Insurance (NI) from April 2029, according to documents leaked ahead of the Budget.
This means contributions above this figure will be treated as ordinary employee pension contributions in the tax system.
Around a third of private sector employees make use of salary sacrifice arrangements, while almost 10% of public sector workers do so too.
The changes are expected to bring upheaval to a large number of workers with removal of the arrangement costing millions of employees hundreds of pounds a year.
Limiting National Insurance relief will also lead to a higher tax bill for many pension savers who use salary sacrifice.
Experts have slammed the attack on salary sacrifice, saying it is a critical way for firms to manage rising costs and protect their staff’s financial and physical wellbeing.
SPP warns MPs against scrapping salary sacrifice
Some have dubbed it a “stealth tax rise in Employer National Insurance”.
Salary sacrifice is a formal agreement between an employer and employee in which the employee voluntarily gives up part of their gross salary in exchange for a non-cash benefit.
Because the exchange happens before tax and National Insurance are calculated, both parties typically save on NI contributions.
