From April 2029, salary sacrifice pension contributions will lose their National Insurance exemption above the first £2,000 a year, a change confirmed in the Autumn Budget 2025. For most employees, that’s a modest hit to take-home pay. For company directors who’ve built their pension planning around salary sacrifice, it’s a different scale of problem.
Salary sacrifice works by reducing gross salary, or sacrificing a bonus, in exchange for a larger employer pension contribution. It’s a popular way for directors to extract profit from their own business tax-efficiently, since both employee and employer National Insurance are saved on the sacrificed amount. From 2029, that saving only applies to the first £2,000. Anything sacrificed above it, which for many directors is the bulk of the contribution, will attract National Insurance as normal, on both sides.
Why directors feel this more than most
An employee sacrificing a modest slice of salary into their pension might lose £80 to £160 a year once the cap bites, according to industry modelling. A director who has structured their entire remuneration, salary, bonus, and pension around sacrificing tens of thousands a year into their pension is looking at a much larger erosion of a strategy that has, for years, been one of the most efficient ways to extract value from a company.
April 2029 feels far off, but remuneration structuring isn’t something to rebuild in a hurry. Decisions about salary versus dividend versus pension contribution, often set up years ago and left to run, need lead time to unwind and rebuild around a different balance.
Why 28 October matters
The Autumn Budget takes place on 28 October 2026 against an already shifting pension landscape. Inheritance Tax is being extended to unused pensions and death benefits from April 2027, plus the salary sacrifice cap from April 2029, and there’s no guarantee it stops there. Reviewing a remuneration structure properly now is easier than revisiting it later because it was built around rules that have since changed.
What business owners should do now
Business owners using salary sacrifice for pension contributions above £2,000 a year should use this as a prompt to review the bigger picture. That means looking at how remuneration is currently structured, understanding the potential cost of the cap from April 2029, and considering whether an alternative approach would be more suitable.
This is where professional financial planning can help. Through retirement planning with Beaumont Wealth, directors can explore a pension strategy that reflects how they take money out of their business, their wider financial circumstances and their retirement goals.
