Two National Insurance developments confirmed in early 2026 are relevant for people running businesses and working for themselves.
The first is the annual National Insurance update that takes effect from April 2026 and feeds directly into payroll, drawings and cash flow. The second is a reform to the National Insurance treatment of pension salary sacrifice arrangements that progressed through Parliament in January 2026 but is scheduled to take effect later, from April 2029.
These changes operate on different timelines but point in the same direction. Short-term National Insurance updates continue to influence day-to-day costs, while the pension reform signals closer scrutiny of arrangements that reduce National Insurance exposure and require longer-term planning.
What changes from April 2026
The Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026 set the National Insurance framework for the 2026 to 2027 tax year. These are the annual Regulations that establish how Class 1, Class 2, Class 3 and Class 4 National Insurance contributions are calculated from 6 April 2026.
While many headline thresholds remain unchanged, the Regulations still matter. They provide the legal footing for National Insurance calculations for the year and drive how much is paid by employers, company directors and the self-employed. Software updates and tax calculations rely on these figures being applied correctly from the first payment period of the new tax year.
For business owners, this is less about headline announcements and more about accuracy. Errors early in the year can run for months before being spotted, particularly where payroll is outsourced or where drawings and salary decisions are made infrequently.
Veterans’ National Insurance relief extended
The same Regulations extend the zero-rate employer National Insurance relief for qualifying veterans. The relief will now apply until 5 April 2028, covering the 2026 to 2027 and 2027 to 2028 tax years.
Where the relief applies, employer National Insurance is not due on earnings up to the upper secondary threshold for qualifying veterans. For smaller businesses, this can represent a meaningful cost saving, but only if the relief is claimed correctly.
The extension gives more time for businesses to check whether they are eligible and to ensure payroll records correctly identify qualifying veterans. Mistakes in classification or reporting can lead to underpaid National Insurance and later correction, often at an inconvenient time.
Pension salary sacrifice: change confirmed for April 2029
Alongside the April 2026 changes, a more significant reform is now firmly on the legislative path. In January 2026, the National Insurance Contributions (Employer Pensions Contributions) Bill completed its key stages in the House of Commons and passed without amendment.
The Bill introduces a change from 6 April 2029 to the National Insurance treatment of pension contributions made through salary sacrifice. Under the new rules, only the first £2,000 per year of pension contributions made via salary sacrifice will remain free of employee and employer National Insurance. Contributions above that level will attract Class 1 National Insurance.
This change is often misunderstood. It does not mean that all employer pension contributions will become subject to National Insurance. The government has been clear that employer pension contributions that are not made through salary sacrifice will continue to be free of National Insurance. The reform is targeted at salary sacrifice arrangements specifically.
The Bill passed the Commons by a clear majority and now moves to the House of Lords. While it is not law yet, the scale of support and the absence of amendments mean April 2029 should be treated as a settled implementation date.
Why this matters for small businesses and the self-employed
For smaller businesses, National Insurance feeds directly into pay decisions, director remuneration, pension planning and overall affordability. Annual changes affect cash flow immediately, while longer-term reforms shape how remuneration is structured.
The April 2026 changes require practical readiness. Payroll settings, director salaries and contribution calculations should reflect the new tax year from day one. The April 2029 pension reform requires something different: time and modelling. Businesses that rely on salary sacrifice arrangements may want to review whether those structures still make sense once the £2,000 National Insurance-free cap applies.
Planning ahead
National Insurance changes tend to arrive quietly, but the impact builds over time. For 2026, the priority is getting calculations right and avoiding avoidable errors. For 2029, the priority is understanding future cost exposure and avoiding last-minute restructuring.
Business owners who keep National Insurance under regular review are better placed to manage cost, avoid corrections and make informed decisions about pay and pensions. Those who leave it on autopilot often discover the consequences only after the numbers have already moved.
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 Limited - a Marketing & Content Agency for the Professional Services Sector.
