Salary sacrifice meaning

FORTHCOMING CHANGE: On 26 November 2025, within Budget 2025, the government confirmed that from April 2029, only the first £2,000 each tax year of a pension contribution made pursuant to a salary sacrifice arrangement will be free of National Insurance contributions (NICs). Any amount sacrificed by an employee above £2,000 a year will attract both employer and employee NICs, so the portion over £2,000 will, for NICs, be handled in line with standard employee workplace pension payments, meaning the excess is treated in the same way as other employee workplace pension contributions for NICs purposes. Employer contributions are unaffected, as is income tax relief. Employers will need to report the total amount of salary sacrificed through existing payroll software, with HMRC committing to engage with stakeholders. HMRC will publish further guidance ‘before April 2029’. The National Insurance Contributions (Employer Pensions Contributions) Bill 2026 will insert a new subsection into section 4 of the Social Security Contributions and Benefits Act 1992 that empowers the government to make regulations providing for...

In this issue: Trusts Court of Protection UK taxation for Private Client Updates to HMRC Manuals Tax avoidance, evasion and non-compliance Regulatory compliance for Private Client Budgets and Finance Bills Family enterprises and ownership frameworks Disputed trusts and estates Pensions, insurance and tax-efficient investments Scotland, Wales and Northern Ireland International Question of the week Additional Private Client updates this week Daily and weekly news alerts LexTalk®Private Client: a Lexis+® community New and updated content Dates for your diary Trackers Latest Q&As Useful information Trusts HMCTS issues guidance on applications to recover funds paid into the High Court, Chancery Division HM Courts & Tribunals Service (HMCTS) has issued guidance on making applications to recover money held by the High Court (Chancery Division). Released on 18 December 2025, the guidance covers three situations: surpluses from property repossessions when entitled parties cannot...

In this issue: The Pensions Regulator Pension Protection Fund Pension Schemes Bill The pensions tax regime Pensions accounting Daily and weekly news alerts Dates for your diary Trackers The Pensions Regulator TPR publishes 2025 DC landscape report highlighting consolidation trends The Pensions Regulator (TPR) has released its 2025 overview of the UK occupational defined contribution (DC) market, confirming a continued move towards fewer, larger schemes and urging trustees, particularly those of smaller arrangements, to test value for savers and consolidate where it is lacking. The analysis shows DC scheme numbers fell by 15% to 790 in 2025, chiefly as schemes with fewer than 5,000 members left the market. Over the period, total assets rose 22% from £205bn to £249bn and memberships increased by 7%, reflecting consolidation. Master trusts now dominate, holding 30.1 million memberships (92%) and £208bn of assets (83%). TPR stressed that larger schemes are typically better positioned to deliver stronger investment performance and...

Original news Source: Hansard Debate: National Insurance Contributions (Employer Pensions Contributions) Bill, Volume 777: debated on Wednesday 17 December 2025 News summary MPs have approved the Second Reading of the National Insurance Contributions (Employer Pensions Contributions) Bill following a concise yet pointed Commons exchange on 17 December 2025. The government measure (bill 344 in the 2024–25 session), brought forward on 4 December 2025, would create a power to levy NICs on pension salary sacrifice amounts above £2,000 per year, with implementation scheduled for April 2029. Ministers contended the proposal is a proportionate, targeted step to contain the fast-escalating fiscal cost of NIC relief for salary sacrifice—projected to almost triple by the decade’s end—and to bolster fairness, as many employees have no access to salary sacrifice at all. Opposition parties countered that the plan would deter saving, increase expense and administrative complexity for employers, and could, over time, depress pension contributions. The Bill cleared its Second Reading by 312 votes to 165 (Division 395) and will now advance under an...

ARCHIVED This archived Practice Note is not being maintained and is supplied for background purposes only. It covers the original Coronavirus (COVID-19) Job Retention Scheme (CJRS), first unveiled by the government on 20 March 2020, which applied from 1 March to 30 June 2020. For information on: the extended CJRS operating between 1 May and 30 September 2021, see Practice Note: Coronavirus Job Retention Scheme (extended version 1 May to 30 September 2021) [Archived] the extended CJRS in effect from 1 November 2020 to 30 April 2021, see Practice Note: Coronavirus Job Retention Scheme (extended version 1 November 2020 to 30 April 2021) [Archived] the revised CJRS running from 1 July to 31 October 2020, see Practice Note: Coronavirus Job Retention Scheme (extended version 1 July to 31 October 2020) [Archived] The CJRS was a temporary initiative, originally intended to run for three months from 1 March 2020. On 17 April 2020, HM Treasury announced an extension to 30 June,...

This Practice Note provides overarching guidance on how tax affects contributions to, and benefits paid from, pension schemes, together with the varieties of pension orders that can be made within financial order proceedings. Specialist advice should be obtained where necessary. Tax concessions Tax incentives on pension contributions encourage individuals and employers to build up future retirement savings...

FORTHCOMING CHANGE: On 26 November 2025, within Budget 2025, the government confirmed that from April 2029, only the first £2,000 a year of pension contributions made under a salary sacrifice arrangement will be outside the scope of National Insurance contributions (NICs). Amounts given up through salary sacrifice above £2,000 annually will attract both employer and employee NICs, meaning any excess over £2,000 will be treated for NICs in the same way as other employee workplace pension payments. Employer contributions remain unchanged, and income tax relief is not affected. Employers must report the total salary forgone via existing payroll systems, and HMRC has pledged to liaise with stakeholders. Further guidance will be issued ‘before April 2029’. The National Insurance Contributions (Employer Pensions Contributions) Bill 2026 will add a new subsection to section 4 of the Social Security Contributions and Benefits Act 1992, enabling regulations to deem sacrificed sums as remuneration from employment for NICs purposes. See: Policy paper: salary sacrifice reform for pension contributions and National Insurance Contributions (Employer Pensions...

FORTHCOMING CHANGE: On 26 November 2025, within Budget 2025, the government confirmed that, from April 2029 onwards, only the initial £2,000 per year in total of any pension payment under a salary sacrifice scheme arrangement will escape National Insurance contributions (NICs). Amounts employees sacrifice beyond £2,000 annually will attract both employer and employee NICs, meaning any sum over that limit will, for NICs purposes, be handled in the same way as standard employee workplace pension payments. Employer pension contributions are unchanged, and income tax relief also remains intact. Businesses must record the aggregate salary given up using their existing payroll software systems, and HMRC has pledged to consult and engage stakeholders, as required. Further HMRC guidance will be published ‘before April 2029’...

FORTHCOMING CHANGE On 26 November 2025, as part of Budget 2025, it was confirmed that from April 2029 only the first £2,000 per year of pension contributions made via a salary sacrifice arrangement will be exempt from National Insurance contributions (NICs). Any employee contributions sacrificed above £2,000 a year will attract both employer and employee NICs, meaning the portion exceeding £2,000 will, for NICs purposes, be handled in the same way as other employee workplace pension contributions. Employer contributions are unchanged, and income tax relief remains in place...

FORTHCOMING CHANGE: On 26 November 2025, within Budget 2025, the government confirmed that from April 2029, only the first £2,000 per year of pension saving made under a salary sacrifice arrangement will be exempt from National Insurance contributions (NICs). Employee sums channelled through salary sacrifice above £2,000 a year will attract both employer and employee NICs, with the effect that any portion exceeding £2,000 will be treated for NICs in the same manner as other employee workplace pension contributions. Employer contributions remain unchanged, and income tax relief is unaffected. Employers will be required to report the total salary sacrificed through existing payroll software, and HMRC has pledged to engage with stakeholders across the sector. HMRC will issue further guidance ‘before April 2029’. The National Insurance Contributions (Employer Pensions Contributions) Bill 2026 will introduce a new subsection into section 4 of the Social Security Contributions and Benefits Act 1992, empowering the government to make regulations so that sacrificed amounts are treated as remuneration arising from employment for NICs purposes. See:...

For the purposes of this Q&A, we proceed on the basis that, by this stage, the employee’s salary has either been paused or reduced. A contract of employment may set out express terms granting the employee a right to be paid, and to receive contractual benefits, during any spell of sickness absence. In some situations there may even be an implied term requiring the employer to both pay and to provide contractual benefits while the employee is off sick. As regards express provisions, an employer is not obliged to accept any such express contractual terms. Where the employer does agree, the employment contract will usually specify how long any sick pay entitlement lasts, the rate at which sick pay will be paid, and whether the employee will continue to receive contractual benefits during a period of sickness absence. For instance, an employer might agree to pay sick pay at the full rate for a defined period of absence—perhaps the first three or six months of sickness absence—then at half rate...