Salary sacrifice cap and the squeezed middle

The £2,000 cap on National Insurance (NI) free salary sacrifice pension contributions was sold as a tax on high earners but, if you look closer, the opposite is true.

In fact, the people most exposed are middle-income savers and the small businesses that employ them. For the so-called “squeezed middle”, it is yet another quiet hit to take.


Why do the rules adversely affect middle-earners?


From April 2029, salary sacrifice tax relief will continue to be available, but only the first £2,000 of employee pension contributions each year will be free of NI.

Anything above that becomes liable to NI for both the employee and the employer and the full adverse effect is clear once the different rates of NI are accounted for.

If a person’s total pension contributions are modest, say up to six per cent, those individuals who earn between £35,000 and £50,270 will pay an eight per cent NI charge on pension contributions above the £2,000 cap.

By contrast, an individual whose earnings already exceed the upper earnings limit of £50,270 will pay employee NI at just two per cent on those same excess contributions.

This imbalance in the NI system means that those on lower incomes could pay four times the NI rate on their pension savings in excess of the new threshold than the highest earners pay.


How does this change affect employers’ National Insurance bills?


Many employers currently share their own NI savings by topping up staff pensions, but a new 15 per cent employer NI charge on contributions above the cap makes those top-ups unaffordable for a lot of firms.

As a result, some employees could see the overall efficiency of their pension saving above the cap fall by as much as 23 per cent once lost top-ups are counted.

Even those who stay below the threshold are not safe, as the Office for Budget Responsibility (OBR) estimates that around 76 per cent of higher employer costs are eventually passed back to staff through weaker pay rises and trimmed benefits.


Don’t wait for the change


The good news is that there is time to plan, as the rules do not take effect until April 2029, which leaves room to act while current allowances still apply.

If you are a middle earner, this is exactly the moment to review your pension strategy, weigh up complementary options such as ISAs and make sure your retirement plans stay on track.

If you are a middle earner, this is exactly the moment to review your pension strategy, weigh up complementary options such as ISAs and seek professional tax planning advice to ensure your retirement plans remain as tax efficient as possible.


To talk through what the salary sacrifice cap means for you, please get in touch with our team.

Are your finances at risk of cyber-attack? Planning for the worst

By Charlie Flockhart • October 5, 2026
According to the latest Hiscox Cyber Readiness Report, almost two in five small businesses in the UK suffered a successful cyber-attack in the last year, with each attack costing an average of £26,650. Globally, cyber incidents cause around 32 hours of operational disruption a year on average. Cyber-attacks are no longer exceptional events, being viewed more as recurring costs, so businesses must prepare themselves financially for the impact. How should you prepare your finances in advance of a cyber-attack? A cyber-attack is slowly and sadly becoming a reality for many SME owners across the UK. To prepare, business owners should assess the potential financial risk a cyber-attack poses and forecast cash flow to ensure their business can survive one. It could also be beneficial to value your data assets to estimate the worth of any lost revenue and recovery expenses. Business owners may also want to keep offline playbooks. These are secure, printed offline copies of critical financial contacts, account numbers and recovery protocols to ensure that your business has key information in the event of a cyber-attack. Additionally, your business should establish strict double-check procedures for unusual payment requests or changes to supplier details to prevent business email compromise. You should also factor cyber insurance premiums into your operational risk management to ensure that you are prepared for any eventuality. What should you do to get your finances back in check after a cyber-attack? Should the worst-case scenario happen, once you are back on track, the first thing you should do is speak with your accountant. Your accountant will help you to calculate the exact monetary value of damaged assets, lost revenue and stolen money so that you know exactly where your business stands. They will then review your financial data and your tax records to establish a baseline for recovery and determine if the business can continue or if restructuring is necessary. Accountants can also help during complex cyber insurance claims by submitting the required evidence to ensure fair financial assessments of the business interruption costs. Once you have received any insurance payments, an accountant can advise on the tax implications.  How can we help? Cyber-attacks are becoming more prevalent for businesses up and down the UK. That is why it is imperative that you receive advice on how you can best prepare your finances in a worst-case scenario. Our team of accountants can help you to prepare your business for a cyber-attack and in the event of a cyber-attack, we can help you pick up the financial pieces. Get in touch with our team for support with preparing your business for a cyber-attack.

Borrowing amongst SMEs is on the rise – preparing your business for finance

By Charlie Flockhart • October 5, 2026
According to UK Finance, gross lending to SMEs from the main high street banks reached £5.35 billion in the second quarter of 2026, the highest quarterly level recorded since the pandemic. Real estate and professional service firms drove much of this growth, while manufacturers and hospitality businesses borrowed less. How can loans help SMEs? A loan can often be a lifeline for SMEs in a financial rough patch. It can help a business bridge cash flow gaps in the short term, ensuring that it has enough money to cover payroll, rent and supplier obligations. It could also be the case that a loan can help to fund expansion to increase business opportunities or hire more staff. Additionally, loans can help business owners to retain ownership of the company rather than selling equity to investors. However, SMEs need to remember that a loan must be paid back with interest regardless of business performance. How should SMEs prepare for a loan? Preparing your business for a loan can often be a tricky process. First, you will need to gather two to three years of profit and loss statements alongside cash flow forecasts and up-to-date tax filings. Next, you will have to check and correct any errors that may be on your personal or business credit reports in order to optimise your credit profile before borrowing. You will then have to create a strong business plan outlining your core growth strategy and market opportunity. There should be a clear breakdown of how the funds will be used, linking every borrowed pound to revenue generation, as well as a risk mitigation section addressing potential economic downturns. You must consider the lender that you are selecting by comparing criteria across high street banks and alternative providers.  How can an accountant help? An accountant can be one of your most valuable assets when applying for finance. They can help to improve your financial record-keeping, build advanced financial models and stress-test your cash flow to give lenders greater confidence in your business. We understand that it is tough for SMEs to obtain funding at the moment. That is why our team can help you obtain the loan that you need. For support with accessing loans, get in touch with our team.

Medium-sized companies may qualify for audit exemption

By Charlie Flockhart • October 5, 2026
The Department for Business, Innovation, Science and Trade (DBIST) initiated a ‘modernising corporate reporting’ consultation on 7 September 2026, which closes on 30 November 2026. Under the proposed overhauls, many medium-sized companies may be exempt from mandatory audits. This consultation forms part of a wider Government pledge to cut administrative burdens on businesses by 25 per cent by 2029. What is being proposed? The Companies Act 2006 considers various company size categories to assess which reporting, audit and disclosure requirements apply. For medium-sized businesses wanting to access exemptions currently exclusive to small companies, they must not exceed two of the following three thresholds: Turnover of £54 million Balance sheet total of £27 million Average of 250 employees Under these exemptions, many businesses would no longer need to have an audit, provide cash flow statements or prepare consolidated accounts. Elsewhere, the proposals from DBIST include: Introducing an SME accounting standard Allowing companies to calculate employee numbers on a full-time equivalent basis Removing strategic report requirements for most medium-sized private companies Simplifying financial reporting rules Is it always smart to forgo an audit? While the proposals mean audits may become optional for some SMEs, forgoing an audit isn’t always the smartest move. An audit can often go one step further than simple compliance and financial reporting, providing insights and peace of mind that your numbers are accurate. Lenders also often rely on audited accounts when deciding how much to lend and at which interest rate. Likewise, when it comes to selling a business, buyers and investors often look at audited figures when conducting due diligence as they offer greater credibility. For any businesses mulling the exemption, it is important to evaluate long-term plans and whether spending money on an audit could have benefits. At the moment, these changes are part of an ongoing consultation and so may be subject to change in future. We will bring you further updates as they emerge. Speak to an accountant to evaluate whether an audit may be beneficial to your business.