Pension planning for the new tax year 2026/27

The new tax year is the perfect time to review your current pension allowances and ensure the plan you have in place is maximising your savings. One of the most effective ways to do this is through salary sacrifice, which allows you to contribute more to your pension while reducing the amount of tax and National Insurance owed. 

Whether you’re new to using an Umbrella Company or an experienced contractor, this guide explains salary sacrifice in detail and helps you make the most of your retirement planning. 

• Salary sacrifice allows you to contribute pre-tax salary into your pension, therefore saving tax and National Insurance. 
• Employer contributions, government top-ups, and extra tax relief will increase your pension pot faster. 
• Salary sacrifice can reduce your take-home pay and affect benefits, borrowing, or life cover, so it’s essential to properly plan. 
• The SG Umbrella team can offer simple setup, flexible contributions, and access to financial advisers for personalised guidance. 

It’s essential to be proactive in saving for your retirement, and salary sacrifice is one of the most tax-efficient ways to grow your pension. By allocating a percentage of your pre-tax salary to your pension, you reduce both Income Tax and National Insurance contributions, maximising the value of every pound contributed. 

With SG Umbrella, contributing via salary sacrifice is simple: 

• Contributions are taken before payroll taxes, reducing Employer NI, Employee NI, and PAYE. 
• Payments are made monthly (after the 5th) for contributions from the prior tax month. 
• Private pension contributions incur a small additional fee of £5/week, which includes access to a Financial Adviser. 
• Maximum non-taxable contributions: £60,000/year or 100% of earnings (after National Minimum Wage and holiday pay). Any contributions above the £60,000 will be treated as taxable by HMRC. 
• Any unused allowance from previous years may also be used (consult a Financial Adviser first). 

Benefits 

• Tax Savings: Contributions are exempt from tax and National Insurance up to £60,000. 

• Government Top-Up: Basic rate taxpayers receive an additional 20% from the UK government, meaning you could get an additional £20 for every £80 contributed. If you pay 40% or 45% tax, then you can claim the additional relief via your Self-Assessment. 

• Reduced Tax Liability: Pre-tax contributions lower your overall taxable income. 

• Extra Pension Relief: Higher-rate taxpayers benefit from maximised tax relief. 

Considerations 

• It isn’t suitable if contributions drop your salary below the National Minimum Wage. 

• It can reduce your take-home pay, which can affect your day-to-day finances. 

• It could impact state benefits, borrowing capacity, and life insurance. 

Salary sacrifice can often be a more tax-efficient way to contribute to your pension compared to a standard workplace pension arrangement. Because contributions are made before tax and National Insurance are deducted, many employees may benefit from additional savings – and in some cases, higher overall pension contributions. 

However, the actual benefit of salary sacrifice depends on your individual circumstances. Factors such as your salary level, tax position, National Insurance thresholds, eligibility for National Minimum Wage, and other personal considerations can all affect the outcome. 

For some people, the difference can be meaningful. For others, the impact may be smaller. That’s why it’s important not to rely on generic examples. 

If you’d like to understand how salary sacrifice could work for you, we’re happy to provide a personalised illustration based on your own situation. Get in touch with the SG Umbrella team and we’ll talk you through your options so you can decide what’s right for you.  

Getting started is easy: 

1. Decide how much you want to contribute monthly (either a % or fixed amount). 
2. Complete the pension form and sign a salary sacrifice agreement. 
3. Your SG Umbrella team will set up your contributions and explain the process. 
4. You can leave the scheme at any time, with clear guidance provided. 
5. If you need a pension provider, SG Umbrella partners with specialists and can arrange a call with a Financial Adviser. 

Your SG Umbrella team is always available to answer questions or help you connect with experts. 

Salary sacrifice is a powerful tool for boosting your pension and reducing tax liabilities. With SG Umbrella, the process is simple, flexible, and supported by expert guidance. 

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