Overview

• HMRC’s new research examines three hypothetical reforms to the salary-sacrifice pension system.
• The proposals include removing both tax and National Insurance exemptions on sacrificed pay, removing only NI relief, or applying NI charges solely to amounts above a £2,000 annual threshold.
• Under the broadest option, a £35,000 earner could face an extra £560 a year in combined tax and NI costs, while employers might incur roughly £240 more in NI contributions.
• Chancellor Rachel Reeves is expected to consider the reforms as a revenue-raising measure to address a multibillion-pound hole in the public finances in her autumn Budget.
• The Treasury has dismissed the proposals as speculative, even as experts warn the changes would shrink pension pots for millions of workers.