Salary Sacrifice
Under current rules if an employee uses salary sacrifice to contribute into a pension there is National Insurance (NIC) relief for both employee and employer. Other methods of paying into a pension such as net pay arrangements do not benefit.
From April 2029 NIC relief on salary sacrifice will be capped at £2,000 of pension contributions each year. This does not affect salary sacrifice for other benefits, such as the “ride-to-work” bike scheme.
The measure reduces one of the small tax advantages from last year’s Budget announcement to increase employers NIC, which otherwise could increase the benefit of saving into a pension through salary sacrifice.
ISA limits
ISA Subscription limits remain frozen at £20,000 until 2030/31, although for under 65-year-olds the cash ISA limit will be reduced to £12,000 with the remaining £8,000 allowance earmarked for Stocks and Shares. The Chancellor stated this is to encourage people to invest in the UK.
Tax on State Pension
For pensioners, the policy commitment to the triple lock and freezing of allowances and tax bands means the State Pension may exceed the tax-free personal allowance. The Chancellor hinted the government would examined different ways of collecting tax owed on the State Pension, with more detail next year.
Voluntary NIC for non-residents
Non-UK residents will no longer be able to pay voluntary Class 2 NIC contributions to obtain qualifying years for entitlement to the State Pension. They will still be able to use the more expensive Class 3 voluntary contributions, but only if they have worked in the UK for more than 10 years and already have 10 or more years of qualifying contributions.
Transferable APR / BPR allowance
The Chancellor announced a concession to the widely talked about changes to 100% APR and BPR relief. The £1 million pound allowance will be transferable to a surviving spouse or civil partner on death. This means couples can benefit from 100% relief for up to £2 million worth of qualifying assets. This will include situations where the first death occurred before 6 April 2026.