Salary sacrifice pension contributions – November 2025 Budget calculator

The November 2025 Budget confirmed that from April 2029 salary sacrifice National Insurance relief will be capped at £2,000 a year across employer and employee NI. The Treasury says it is a pragmatic step to limit NI-free pensioning of bonuses; the OBR reckons it will raise about £4.7bn in 2029 (Guardian, HL, Telegraph).

This calculator compares today’s rules with that 2029 cap, showing employee NI, employer NI, income tax, and the child benefit charge so you can gauge the impact of capping salary sacrifice pension contributions. It’s illustrative scenario planning, not personal tax advice.

Who made this calculator?

This tool was made by me, Dan, a designer and tinkerer. I built it to find out how the government's proposed NI cap might hit my own take-home pay; I'm sharing it in case it helps you too.

If you like this calculator, you might also like some of the other money tools I've built: Energy Bill Calculator, Car Cost Tool, and Pension Drawdown Calculator.

Key modelling assumptions
  • 2025/26 England & Wales and 2024/25 Scottish income tax bands are available; pick your tax nation below the inputs.
  • Salary sacrifice reduces taxable pay plus both employee and employer NI bases; the proposed cap only limits the NI-free portion.
  • Student loan Plan 2, Plan 5, or Postgrad repayments can be modelled one at a time; pass-through lets you share employer NI savings into pension.
  • Child benefit clawback follows HMRC adjusted net income rules; no tapered allowances or other credits are modelled.
  • Inputs are annual, cover one employment, and round to pounds/pence so penny differences can appear.

Inputs

Pre-sacrifice gross salary for the tax year.

Pension via salary sacrifice – input type

If using %, this is the share of salary sacrificed into your pension via salary sacrifice contributions. If using fixed amount, this is the annual £ sacrificed.

Labour has confirmed a £2,000 cap; tweak this number if policy shifts so you can see the impact.

Income tax nation

Scottish rates use the six-band 2024/25 structure; personal allowance taper still applies above £100k.

Based on annual PAYE income after salary sacrifice. Postgrad loans stack with Plan 2/5 in reality; model one plan at a time here.

Some employers share their NI saving on sacrificed pay by adding it to pension contributions. Set 0% to ignore this, 100% to pass it all through.

Approximate total child benefit for the year. If you don’t receive it, set this to 0.

Uses the assumptions listed above; update the values if policy thresholds change.

Results at a glance

Compare what changes for you and for the employer if an annual NI cap of £2,000 on salary sacrifice pension contributions went live.

Employee outcome

Take-home (incl. child benefit & student loan)

–

–

Current rules:
£–
With NI cap:
£–
Change per year:
£–
Change per month:
£–
Current rules With NI cap Income tax £– £– Employee NI £– £– Student loan £– £– Child benefit (net) £– £–
Employer NI passed into pension (current rules) £–
Employer NI passed into pension (with cap) £–
Change in pension top-up £–

Using 0% of the employer NI saving.

Employer outcome

NI bill & pass-through

–

–

Total employer outlay (NI + any pass-through) – current rules:
£–
Total employer outlay – with NI cap:
£–
Change per year:
£–
Change per month:
£–
Current rules With NI cap Employer NI £– £– NI passed into pension £– £–

Inside IR35 or umbrella contractor?

Employer NI still comes out of your day rate. The calculator shows an employer NI change of £– a year (about £– a month). Expect umbrellas to pass that on.

To keep pace, you (or your umbrella if they're feeling generous!) would need to add roughly £– to your day rate, assuming about 220 chargeable days for the year.

Scenario snapshot

The headline assumptions behind the calculation.

Gross salary:
£–
Salary sacrifice pension contributions:
£–
NI-free portion if capped:
£–
Income tax nation:
–
Student loan plan:
–
Employer NI passed to pension:
0% (worth £– now)
Annual child benefit received:
£–

Ready reckoner

Use this quick guide to estimate how each extra £1 of sacrifice above the cap behaves before you plug in exact numbers.

Salary band Employee NI clawed back Employer NI clawed back Combined impact per £1
Below £50,270 (main NI rate) 8p 15p 23p
Above £50,270 (upper NI rate) 2p 15p 17p
Employer only calculation — 15p 15p

Example: if you sacrifice £5,000 above the cap while earning below the upper earnings limit, expect roughly £5,000 × 23% ≈ £1,150 of total NI to be clawed back (8% from you, 15% from your employer). Exact figures still depend on the interactions with income tax and child benefit, so run the full calculator for a tailored view.

How this calculation works

Three scenarios are modelled: no sacrifice, today’s rules, and a capped NI relief scenario. The calculator re-runs income tax (rUK or Scottish), student loans, employee NI, employer NI (plus any pass-through), and child benefit for each.

  1. Your salary sacrifice pension contributions reduce taxable salary for income tax and the child-benefit test regardless of the cap.
  2. Under current rules, both employee and employer NI ignore the sacrificed pay.
  3. Under the cap, only the first £2,000 of sacrifice avoids NI; everything above is treated as NI-able pay again.
  4. Student loan repayments follow PAYE income after sacrifice; they do not change between the two NI policies.
  5. Any employer NI saving you choose to pass through to pension also shrinks if the cap claws back NI.
  6. The tool takes the difference between the two policy runs to show yearly and monthly gains or losses.
Detailed rates & thresholds used in the calculation

Income tax

Personal allowance
£12,570 (tapered from £100k)
Basic rate
20% up to £50,270
Higher rate
40% from £50,271 to £125,140
Additional rate
45% above £125,140
Scottish bands
19/20/21/42/45/48% with 2024/25 thresholds

Employee NI

8% rate band
£12,584 to £50,284
2% rate
Earnings above £50,284

Employer NI

Rate
15%
Secondary threshold
Starts above ~£5,000

Child benefit charge

Full amount
Kept up to £60,000 adjusted net income
Taper
Linear withdrawal between £60,000–£80,000

Student loans

Plan 2
9% over £28,470
Plan 5
9% over £25,000
Postgraduate
6% over £21,000

Salary sacrifice & NI cap FAQ

Answers to the most searched questions, with links straight into the calculator so you can check your own numbers.

When does the £2,000 NI cap on salary sacrifice start?

The November 2025 Budget confirmed the cap will apply from April 2029. The calculator compares today’s rules with the proposed cap side by side.

Run the calculation
Does the cap limit pension tax relief or only National Insurance?

Only NI relief is capped. Income tax relief on your pension contributions still works the same way; this tool isolates the NI clawback while showing the tax and child benefit knock-ons.

See the cap breakdown
How do child benefit and adjusted net income interact with the cap?

Salary sacrifice still lowers adjusted net income for the high income child benefit charge, even if NI relief is capped. Enter your benefit amount to see how much is preserved.

Read the taper guide
What if my salary is between £100k and £125k?

The personal allowance taper creates a 60% marginal rate in this band. Sacrificing pension can still reduce that tax cliff; the calculator shows the effect with and without the NI cap.

Learn about the taper
Can contractors inside IR35 benefit from salary sacrifice?

Umbrella workers fund employer NI from their day rate. The calculator highlights how much employer NI saving disappears above the cap and suggests a day-rate uplift to stay whole.

View the contractor explainer