Two separate National Insurance developments were confirmed in early 2026 and are relevant for employers, HR teams and anyone with responsibility for payroll and reward structures.
The first is the annual re-rating of National Insurance contributions, which takes effect from April 2026 and applies to day-to-day NIC calculations. The second is a reform to pension salary sacrifice arrangements that progressed through Parliament in January 2026 but is scheduled to take effect later, from April 2029.
Taken together, these measures reflect the current direction of travel on National Insurance. Short-term changes continue to require close operational attention, while longer-term reform signals increased scrutiny of arrangements that reduce NICs liabilities.
NIC rates, limits and thresholds from 6 April 2026
The Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026 are draft affirmative Regulations laid to give effect to the annual re-rating of National Insurance contributions for the 2026 to 2027 tax year.
From 6 April 2026, the Regulations update the rates, limits and thresholds used to calculate liability, or voluntary payment, for Class 1, Class 2, Class 3 and Class 4 National Insurance contributions. Although many headline limits and thresholds remain unchanged, the Regulations provide the statutory basis for payroll calculations for the new tax year and should not be treated as a formality.
For employers, the impact is primarily operational. Payroll systems need to apply the correct thresholds from the first pay period after 6 April, and early errors can compound quickly across the workforce. HR teams should also expect queries from employees where take-home pay changes, even modestly, as a result of the new year settings.
Extension of employer NIC relief for qualifying veterans
The draft Regulations also extend the zero-rate relief on secondary Class 1 National Insurance contributions for employers of qualifying veterans. The relief will now continue to apply from 6 April 2026 until 5 April 2028.
For employers already claiming the relief, the extension provides continued cost certainty when employing eligible veterans. For those not currently using it, the additional two-year window allows time to review eligibility and ensure payroll processes are set up correctly. Claims rely on accurate identification of qualifying veterans and correct payroll reporting, and errors can lead to underpaid NICs or retrospective adjustments.
Pension salary sacrifice reform: Bill progresses unamended
Alongside the 2026 NIC re-rating Regulations, the National Insurance Contributions (Employer Pensions Contributions) Bill reached a significant milestone in January 2026. The House of Commons completed Committee of the Whole House and Third Reading stages on 21 January 2026, and the Bill passed without amendment.
The Bill provides for a change from 6 April 2029 to the National Insurance treatment of pension contributions made through salary sacrifice. Under the legislation, only the first £2,000 per year of pension contributions made via salary sacrifice will remain exempt from primary and secondary Class 1 National Insurance contributions. Amounts above that level will attract NICs.
It is important to distinguish this from employer pension contributions more generally. The government’s stated position is that employer pension contributions that are not made through salary sacrifice will continue to be free of National Insurance. The reform is targeted specifically at salary sacrifice arrangements.
During Commons scrutiny, opposition MPs sought to delay or narrow the measure and raised concerns about complexity, distributional impact and pension adequacy. The government resisted all proposed amendments. At Third Reading, the Minister for Pensions described reform as inevitable in light of the cost of pension salary sacrifice and defended the £2,000 NIC-free allowance and extended lead-in period as a pragmatic compromise.
The Bill was approved by 316 votes to 194 and now proceeds to the House of Lords. It will not become law until it completes the Lords stages and receives Royal Assent.
What this means for employers and HR teams
The 2026 NIC re-rating is immediate and operational. Payroll systems should be ready for 6 April 2026, and internal checks early in the tax year are advisable to catch errors before they scale. HR teams should also be prepared to explain changes to employees, particularly where net pay fluctuates.
The pension salary sacrifice reform is not imminent, but it is settled policy in legislative terms. The absence of Commons amendments and the size of the majority reduce the likelihood of fundamental change. Employers with salary sacrifice arrangements should treat April 2029 as a fixed planning horizon rather than a tentative proposal.
Key planning points
Annual NIC changes rarely attract attention on their own, but they can create risk when layered on top of wider reform. For 2026, the priority is accuracy and payroll readiness. For 2029, the priority is forward planning.
Employers that treat NICs as a purely technical payroll issue are more likely to face correction exercises, employee dissatisfaction and unplanned cost increases. Those that build NIC planning into wider reward and workforce strategy are better placed to absorb change without disruption.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing & Content Agency for the Professional Services Sector.
