Changes to salary sacrifice pension schemes to hit employee pay packets and pension funds

Commenting on changes to salary sacrifice tax measures announced today, Rachel McEleney, tax director at Deloitte, said:  
 
“The Chancellor confirmed today that the national insurance (NIC) relief for employees and employers on contributions paid by way of salary sacrifice will be limited to the first £2,000 from the 2029/30 tax year.

“Currently, salary sacrifice can save employees 8% or 2% in NIC on the amounts that they contribute, whilst employers save 15% on the same amount. If an employee earning £50,000 sacrifices 10% of their salary, their income tax and NIC is currently calculated based on the reduced salary of £45,000. The proposals will cause the employee’s NIC deductions in their payslips for 2029/30 to increase by £240 over the course of the tax year. The employer’s NIC will increase by £450. 

“While not directly paid by the employee, some schemes currently pass on part of the employer’s NIC savings to employees through a top-up in employer contributions. The erosion of these savings could lead to employers reviewing their pension arrangements, possibly leading to lower overall contributions being made to the employee’s scheme.

“The changes do not affect the income tax relief on salary sacrifice contributions. Like other types of pension contributions, these will continue to provide income tax relief at the individual’s marginal tax rate. This can include reducing the amount of high income child benefit charge or keeping taxable income below £100,000 to prevent the loss of the personal allowance or tax-free childcare.”

Note to editors

Deloitte spokespeople

Deloitte has a range of spokespeople available to comment on today’s Budget. They can be reached on 02920 927541 or one of the following numbers: 

• Ian Stewart – chief economist (+44 7785 682226) 
• Amanda Tickel – head of tax and trade policy (+44 7774 337581) 
• Rachel McEleney – personal tax (+44 7826 952940) 
• Alison Lobb – corporate tax (+44 7887 629107)
• James Caldecourt – trade and tariffs (+44 7774 337581) 
• Michael Nicolaides – employment tax (+44 7586 511104) 
• Simon Down – automotive (+44 7824 895798)
• Helen Kaye – hospitality (+44 7824 895798)
• Sophie Brown – retail (+44 7824 895798)
• Andrew Clarke – VAT (+44 7586 511104)
• Philip Parnell – business rates (+44 7990 434703) 
• Ed Roddis – public sector (+44 7855 399368)
• Toby Price – stamp duty (+44 7990 434703)
• James Clare – carried interest (+44 7586 511104) 

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