Cap salary-sacrifice NIC relief: note

Central fiscal result

-£4.8bn - Net fiscal impact in 2029-30

Low case: -£6.5bn. High case: -£2.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Models cap salary-sacrifice nic relief by 2029-30.
• Baseline is current policy or published departmental plans.
• Central case uses published party or official anchors where available.
• Wider manifesto interactions are excluded unless stated.

Affected population

• Affected units are people, firms, households or providers depending on policy.
• Direct exposure follows the manifesto or government target group.
• Indirect exposure includes suppliers, workers, consumers and taxpayers.
• Weakest counts are widened in the low and high cases.

Gross impact

• Published anchor or scenario central is +£4.8bn in 2029-30.
• Gross costs or receipts are adjusted for behaviour and delivery risk.
• Tax, benefit or procurement offsets are separated in the fiscal build-up.
• The range is deliberately wider where implementation detail is thin.

Fiscal build-up, central case

• Gross tax or receipt yield: -£6.0bn
• Behavioural and avoidance response: +£1.0bn
• Administration and compliance cost: +£0.1bn
• Other tax-base interactions: +£0.1bn

Central net impact: -£4.8bn in 2029-30.

Behaviour and pass-through

• Low case assumes stronger delivery or receipts than central.
• Central case applies moderate behavioural leakage and pass-through.
• High case allows weaker delivery, larger take-up or higher costs.
• Output effects follow incidence, capacity and investment channels.
• Distributional gains do not automatically imply GDP gains.

Phasing

• 2026-27: -£0.5bn. Phased implementation and take-up.
• 2027-28: -£1.7bn. Phased implementation and take-up.
• 2028-29: -£3.4bn. Phased implementation and take-up.
• 2029-30: -£4.8bn. Phased implementation and take-up.

Main source groups

• HM Treasury, "Budget 2025 policy costings" (2025): Costings provide scored fiscal impacts for the two-child limit, salary sacrifice and EV mileage charge; used where government costings exist.
• HM Treasury, "Budget 2025" (2025): Budget 2025 sets out implemented welfare, energy, motoring and tax-threshold measures; used for current government delivery policies.
• Mirrlees and review team, "Tax by Design" (Institute for Fiscal Studies, 2011): Efficient tax systems should avoid narrow bases and poorly targeted reliefs that distort decisions; useful benchmark for judging tax-base changes and exemptions.
• Saez, Slemrod and Giertz, "The Elasticity of Taxable Income with Respect to Marginal Tax Rates" (Journal of Economic Literature, 2012): Higher marginal rates can raise revenue but behavioural responses and avoidance become important at the top; supports wide ranges for high-income and capital-tax measures.
• Labour Party, "Change: Labour Party Manifesto 2024" (2024): Used to define the pledge wording, policy scope and implementation scenario being modelled.