Is National Insurance payable on employer pension contributions?

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Under current rules, no—employers do not pay National Insurance on the contributions they make to your pension. However, the government has proposed a new Bill that would change this for certain contributions starting in April 2029.

If this proposal becomes law, National Insurance would become payable on “salary sacrifice” pension contributions that exceed £2,000 a year.

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How the Current Rules Work

Right now, if your employer pays money directly into your pension, it is tax-efficient.

• Employer Contributions: Employers pay no National Insurance on these payments.
• Salary Sacrifice: Many employees use “salary sacrifice” schemes to take advantage of this. You agree to give up part of your salary, and your employer puts that amount into your pension instead. Because this counts as an employer contribution, currently neither you nor your employer pays National Insurance on it.

The Proposed Change (The Bill)

The government has introduced the National Insurance Contributions (Employer Pensions Contributions) Bill to change these rules.

• The Proposal: From 6 April 2029, the National Insurance exemption for salary sacrifice would be capped.
• The Limit: You would only get the National Insurance break on the first £2,000 you sacrifice per year.
• The Tax: Any amount you sacrifice above £2,000 would be treated like normal earnings, meaning both you and your employer would have to pay National Insurance on it.

Note: This change would not affect Income Tax. You would still receive Income Tax relief on your pension contributions as normal

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Why Is This Being Proposed?

The government argues that the current system is becoming too expensive and unfair.

• Rising Costs: The cost of this tax break to the government has risen sharply and was forecast to reach £8 billion by 2030.
• Raising Funds: The government estimates this change could raise around £4.7 billion a year by 2029/30 to support public finances.
• Fairness: The Chancellor stated that high earners benefit the most from the current rules, while low earners often do not benefit at all.

Is This a Law Yet?

No. This is currently just a Bill (a proposal).

• It was introduced in Parliament on 4 December 2025.
• It is currently being debated in the House of Commons.
• It must pass through both the House of Commons and the House of Lords before it can become a law.

Until it passes, the current rules remain in place. If it does pass, the changes are scheduled to start in April 2029.

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