How salary sacrifice can help mitigate against National Insurance rise

National Insurance is rising on 6 April but the good news is that salary sacrifice schemes are a good way to decrease taxable income, says David Prosser.

Rishi Sunak
Chancellor of the exchequer Rishi Sunak refused to backtrack on his plans for a 1.25% increase in national insurance.
(Image credit: © Alamy)

There is less than a week to go until national insurance contributions increase, but there is still time to take action to mitigate the tax rise. In last week’s spring statement, chancellor of the exchequer Rishi Sunak refused to backtrack on his plans for a 1.25% increase in national insurance. But salary sacrifice schemes, offered by many employers, are a great way to reduce the impact of the increase, which comes into effect from 6 April.

In a salary sacrifice scheme, you give up some of your salary in return for your employer giving you a benefit of the same value. The most obvious example is a contribution to your pension plan, but some employers also offer benefits ranging from childcare support to the cycle-to-work scheme. In many cases, these benefits are not taxable. As a result, by entering into a salary sacrifice scheme, you are reducing the amount of income on which you will be taxed.

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David Prosser
Business Columnist

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.