DH and I earn relatively good money and are planning for the future having only started pensions about five or six years ago.
We can live on the income that we don't receive that is put into additional voluntary contributions into each of our own pensions.
So currently we both put 30,000 pounds a year into our respective pensions.
As we both work in contracting, via an umbrella company each, then then from the daily rate we both have to apply employers national insurance, employees national insurance, p a y e and a couple of other small charges each.
The addition of employer and employee national insurance will have a huge impact totaling around 13,000 pounds a year additional burden that will not go towards the long-term future savings.
Yes we're lucky to both be earning 60k Plus and to be able to afford to live on half of that after p a y e tax and employee national insurance but I see little points in working and contributing towards a pension when 20% automatically disappears up the wall to be invested in the future.
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Workings are shown below but I appreciate we can probably afford it to help other people.
Overall Additional Burden on the Couple Following the Implementation of Budget Changes
In the specified scenario, each partner operates through an umbrella company billing £220 per day over 260 working days, resulting in a gross annual contract value of £57,200 per person (£114,400 combined). Of this, £30,000 per person is allocated to additional voluntary pension contributions via salary sacrifice, with the remaining £27,200 treated as taxable salary. The Autumn Budget 2024 measures, effective from 6 April 2025, increase the employer Class 1 National Insurance Contributions (NICs) rate to 15% (from 13.8%) and reduce the secondary threshold to £5,000 (from £9,100). The Autumn Budget 2025 introduces a £2,000 cap on NIC relief for salary sacrifice pensions, effective from 6 April 2029, rendering contributions above this threshold subject to both employee and employer NICs.
The additional burden represents the incremental NIC liability imposed on the couple, which reduces their collective net position (take-home pay and pension efficiency). This is calculated as the difference between pre-reform (2024/25 rates, full NIC relief on pensions) and post-reform positions, using 2025/26 NIC rates as the baseline for consistency. Employee NICs are 8% on earnings between £12,570 and £50,270, and 2% above; employer NICs are 15% above £5,000. Income tax relief on the full £30,000 pension contribution persists unchanged, and other factors (e.g., umbrella margins, auto-enrolment) are excluded for focus on NIC impacts.
Pre-Reform Position (2024/25: Full Pension Relief, No 2025 Changes)
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*Taxable salary per person*: £27,200.
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*Employee NIC per person*: 8% × (£27,200 – £12,570) = £1,170.
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*Employer NIC per person*: 13.8% × (£27,200 – £9,100) = £2,498.
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*Total NIC per person*: £3,668.
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*Couple total NIC*: £7,336.
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*Net position per person*: £27,200 salary – £1,170 employee NIC = £26,030 take-home; £30,000 pension (tax-relieved).
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*Couple net position*: £52,060 take-home; £60,000 pension.
Post-2025 Employer NIC Reforms (Full Pension Relief Retained)
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*Taxable salary per person*: £27,200 (unchanged).
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*Employee NIC per person*: £1,170 (unchanged).
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*Employer NIC per person*: 15% × (£27,200 – £5,000) = £3,330.
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*Total NIC per person*: £4,500.
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*Couple total NIC*: £9,000.
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*Additional burden from 2025 reforms*: £1,664 combined (£832 per person, all employer NIC).
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*Net position per person*: £26,030 take-home; £30,000 pension (but employer costs reduce umbrella margins, potentially lowering future distributions).
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*Couple net position*: £52,060 take-home; £60,000 pension (adjusted for higher employer costs).
Full Post-Reform Position (Incorporating 2029 Pension Cap)
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*Taxable salary per person*: £55,200 (£27,200 + £28,000 from pension).
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*Employee NIC per person*: 8% × (£50,270 – £12,570) + 2% × (£55,200 – £50,270) = £3,016 + £99 = £3,115.
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*Employer NIC per person*: 15% × (£55,200 – £5,000) = £7,530.
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*Total NIC per person*: £10,645.
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*Couple total NIC*: £21,290.
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*Net position per person*: £55,200 – £3,115 = £52,085 take-home; £30,000 pension (tax-relieved, but £2,000 NIC-exempt).
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*Couple net position*: £104,170 take-home; £60,000 pension.
Summary of Additional Burden
The cumulative additional NIC burden, relative to the pre-reform baseline, totals £13,954 annually for the couple once all changes are in effect (from 2029 onward). This comprises £3,890 in employee NIC (£1,945 per person, directly reducing take-home pay) and £10,064 in employer NIC (£5,032 per person, potentially passed on via reduced net payments from the umbrella company). The burden is funded from the fixed £114,400 gross contract value, eroding the historical NIC savings on pensions (£14,100 combined pre-reform).
| Component | Per Person (£) | Couple (£) |
|------|----|--|
| 2025 Employer Reforms | 832 (employer) | 1,664 |
| 2029 Pension Cap | 6,145 (3,115 total increase) | 12,290 |
| Cumulative Total | 6,977 | 13,954 |
This represents a 190% increase in total NIC liability for the couple compared to the pre-reform position, primarily due to the loss of NIC exemptions on £28,000 of pension contributions per person. The employer portion may necessitate adjustments to the £220 daily rate (e.g., an uplift of approximately £27 per day combined to offset fully), while the employee portion directly diminishes take-home pay by £3,890 annually from 2029. These measures are projected to generate £25 billion from 2025 employer reforms and £4.7 billion from the 2029 cap government-wide, but they reduce the attractiveness of salary sacrifice in umbrella arrangements.
For personalized projections, including potential mitigations such as contribution adjustments or rate negotiations, consultation with a tax advisor is recommended.