Chancellor Rachel Reeves is reportedly planning a £4 billion tax shake-up targeting workplace pension perks in her upcoming Budget on November 26, as she seeks to plug a major gap in the UK’s public finances.
The proposed changes would affect “salary sacrifice” pension schemes, which currently allow employees and employers to make pension contributions before income tax and national insurance are applied. This system saves both workers and businesses money but could now be scaled back.
Reeves is said to be considering a move to limit or remove national insurance relief on these contributions. Under the expected changes, the amount of salary that can be contributed tax-free to a pension could be capped, increasing national insurance costs for both sides.
According to estimates, a worker earning £35,000 a year and contributing 5% to their pension could pay an extra £210 annually if the exemption is scrapped.
The move, aimed at generating billions for the Treasury, is likely to spark debate over its impact on savers and employers amid cost-of-living pressures.
