The 2026 Budget brings limited immediate change to workplace benefits, but reinforces the need to plan ahead on pension salary sacrifice, payroll costs and financial wellbeing. Here are the main considerations for employers and pension scheme members.

1. Workplace pensions and salary sacrifice

From 6 April 2029, only the first £2,000 per employee, per tax year of pension contributions made through salary sacrifice will remain exempt from National Insurance contributions (NICs). Amounts above this will attract both employee and employer NICs.

Salary sacrifice is not being abolished. Pension Income Tax relief remains unchanged, subject to usual limits, and employer contributions not generated by salary sacrifice remain NIC-free.

Employer action:

• Model employer costs and review contribution design ahead of April 2029.
• Prepare payroll reporting and clear employee communications; further HMRC guidance is expected.
• Read our explainer: Are your employees ready for the salary sacrifice changes?

2. State Pension and the Triple Lock

The existing Triple Lock continues through April 2029. From April 2030, an adjusted approach is intended to limit continuing increases relative to earnings. Workplace and private pensions remain central to longer-term retirement planning.

3. Pension Tax Allowance

A new Pension Tax Allowance, applying from 6 April 2027 to 5 April 2030, is intended to prevent people whose total income does not exceed the full new State Pension from paying Income Tax solely because of State Pension increases.

4. National Living Wage and reward budgets

From 1 April 2027, the National Living Wage rises by 3.9% to £13.21 an hour, while the minimum wage for 18 to 20-year-olds rises by 3.9% to £11.27. Employers should assess payroll costs and any related pension contribution and reward implications.

5. Savings and financial wellbeing

The planned Cash ISA limit reduction has been reversed, retaining the £20,000 limit. A new incentive for first-time Stocks & Shares ISA investors will be explored.
Savings and property income tax rates will rise by a further two percentage points from April 2027, on top of the Budget 2025 increase, reinforcing the value of broader financial education.

6. Support for first-time buyers

A First Time Buyer ISA is due from 6 April 2029, offering a 25% Government bonus on contributions up to £4,000 annually, with no upper age restriction, for qualifying first homes costing up to £450,000.

From 29 October 2026, Lifetime ISA holders buying a qualifying first home above £450,000 face a reduced withdrawal charge of 20%, rather than 25%.

7. Parental support and wider benefits

From April 2029, parental pay extends to eligible self-employed fathers, partners and adopters in Great Britain. Some people with irregular employment histories may also qualify, subject to work and earnings conditions.

Employer-paid Immigration Skills Charges and Certificate of Sponsorship fees will no longer be taxable benefits in kind for payments from 28 October 2026; legislation will follow.

8. Pension death benefits

From 28 October 2026, the existing two-year rule for taxing pension and lump-sum death benefits is removed. This is primarily an individual financial-planning consideration rather than a general workplace benefits issue.

What should employers be thinking about?

The emphasis is on forward planning rather than wholesale benefits redesign. Employers should:

• Review salary sacrifice arrangements and future payroll budgets.
• Help employees connect pension saving with wider savings, protection and home ownership needs.
• Keep communications clear about how benefits work together.

Sources

HM Treasury, Budget 2026, published 28 October 2026.

HM Treasury, Changes to salary sacrifice for pensions from April 2029, published 26 November 2025.

HM Revenue & Customs, Salary sacrifice reform for pension contributions, published 4 December 2025.

Important information
This briefing is intended as a general overview for employers and should not be treated as individual tax, investment, or financial advice. The position may depend on individual circumstances, and further implementation guidance may be issued.