{"id":345294,"date":"2025-12-31T21:04:08","date_gmt":"2025-12-31T21:04:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/345294\/"},"modified":"2025-12-31T21:04:08","modified_gmt":"2025-12-31T21:04:08","slug":"hmrc-rule-change-set-to-stave-off-4-3-million-pensioners-from-2000-allowance","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/345294\/","title":{"rendered":"HMRC rule change set to stave off 4.3 million pensioners from \u00a32,000 allowance"},"content":{"rendered":"

HM Revenue and Customs (HMRC) has announced a major overhaul of salary sacrifice pension arrangements that will limit National Insurance exemptions for millions of workers.<\/p>\n

Under the new policy, a \u00a32,000 annual cap will be placed on the amount of pension contributions made through salary sacrifice that are exempt from National Insurance.<\/p>\n

The change will come into force from April 2029.<\/p>\n

Salary sacrifice pension contributions above \u00a32,000 a year will attract both employee and employer National Insurance contributions.<\/p>\n

Only the first \u00a32,000 contributed each year through salary sacrifice will remain exempt from National Insurance.<\/p>\n

Pension contributions made through salary sacrifice will continue to benefit from Income Tax relief within existing limits.<\/p>\n

The measure represents a significant shift in the tax treatment of salary sacrifice arrangements.<\/p>\n

Salary sacrifice allows employees to reduce their gross pay or give up a bonus.<\/p>\n

In return, their employer pays the equivalent amount into their pension.<\/p>\n

Government estimates show around 7.7 million workers currently use salary sacrifice to make pension contributions.<\/p>\n

Of those, approximately 4.3 million people will not be affected by the new cap.<\/p>\n

\"Pensioner\"\/<\/p>\n

HMRC announced a major overhaul of salary sacrifice pension arrangements<\/p>\n

| <\/p>\n

GETTY<\/p>\n

These individuals contribute \u00a32,000 or less each year through salary sacrifice.<\/p>\n

This group accounts for 56 per cent of all employees using the arrangement, and continue to benefit from full National Insurance exemptions on their pension contributions.<\/p>\n

The Government said the \u00a32,000 threshold was set to protect the majority of pension savers, with the remaining 3.3 million workers will be affected once the new rules take effect.<\/p>\n

This group represents 44 per cent of employees using salary sacrifice for pension saving, which currently contribute more than \u00a32,000 a year through the arrangement.<\/p>\n

For these workers, contributions above the cap will be treated like standard workplace pension contributions for National Insurance purposes.<\/p>\n

Government modelling suggests the financial impact on employees will be relatively modest.<\/p>\n

\"HMRC\"\/<\/p>\n

Employers will also face higher National Insurance costs on contributions above the threshold<\/p>\n

| GETTY<\/p>\n

The average additional employee National Insurance contribution is estimated at \u00a384 in the 2029\/30 tax year.<\/p>\n

Employers will also face higher National Insurance costs on contributions above the threshold.<\/p>\n

Despite the change, employers and employees will still be able to make pension contributions above \u00a32,000 through salary sacrifice.<\/p>\n

However, those additional contributions will no longer be exempt from National Insurance.<\/p>\n

The Office for Budget Responsibility (OBR) has published forecasts on the revenue raised by the policy.<\/p>\n

The measure was discussed in Parliament following a question from Baroness Stedman-Scott.<\/p>\n

She asked what assessment had been made of the OBR\u2019s assumption on cost sharing between employers and employees.<\/p>\n

“What assessment have they made of the OBR’s assumption that, following the decision to apply National Insurance to salary-sacrificed pension contributions above \u00a32,000, employers will pass 76 per cent of the additional cost to employees.”<\/p>\n

Responding on behalf of the Treasury, Lord Livermore said the assumption was consistent with previous changes to employer National Insurance.<\/p>\n

He said the passthrough rate was reflected in the Government\u2019s published costing note.<\/p>\n

Lord Livermore said the policy would apply to all employers that operate salary sacrifice pension schemes.<\/p>\n

This includes organisations in both the public and private sectors.<\/p>\n

He noted that many public sector employers are already restricted from using salary sacrifice for pensions.<\/p>\n

These restrictions are set out under Managing Public Money rules.<\/p>\n

The Government said it remains committed to supporting pension saving.<\/p>\n

Treasury figures show income tax and National Insurance reliefs for pensions are worth more than \u00a370billion each year.<\/p>\n

\"HMRC\"\/<\/p>\n

The rules will not change until April 2029<\/p>\n

| GETTY<\/p>\n

Lord Livermore said: “This is the fairest way to support pensions saving whilst ensuring relief is targeted at those who need it most.”<\/p>\n

The Treasury has framed the policy as a balance between maintaining incentives and addressing the cost of reliefs.<\/p>\n

Ministers say the long lead-in time is designed to give employers and employees time to plan.<\/p>\n

Both public and private sector workers will be subject to the same \u00a32,000 cap.<\/p>\n

However, the practical impact will vary depending on existing salary sacrifice arrangements.<\/p>\n

The Government said further guidance will be published closer to implementation.<\/p>\n","protected":false},"excerpt":{"rendered":"HM Revenue and Customs (HMRC) has announced a major overhaul of salary sacrifice pension arrangements that will limit…\n","protected":false},"author":2,"featured_media":345295,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[84,4176,2218,2222,50,4174,4175,2331,474,56,54,55],"class_list":{"0":"post-345294","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-hmrc","11":"tag-money","12":"tag-news","13":"tag-personal-finance","14":"tag-personalfinance","15":"tag-sgg","16":"tag-tax","17":"tag-uk","18":"tag-united-kingdom","19":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/345294","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=345294"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/345294\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/345295"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=345294"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=345294"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=345294"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}