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New rules announced in the Budget will make salary sacrifice less lucrative, especially for those on middle incomes. Currently, staff who use the salary sacrifice scheme do not have to pay any National Insurance or income tax on that portion of their salary.

From 2029, the amount that workers can salary sacrifice without paying National Insurance will be capped at £2,000 a year. Those wanting to add any more to their pensions via salary sacrifice will have to shell out more in tax.

Analysis shows that those on middle incomes are set to be worst hit by the change, with some having to pay £256 more in National Insurance from 2026 - while those earning more could pay just £72 extra. A simultaneous freeze on income tax thresholds and the level at which graduates pay back student loans means that earners on salaries between £40,000 and £50,000 will be hit the hardest, according to analysis by pensions consultancy LCP.

This is because employees earning up to £50,270 pay the full rate of employee National Insurance. It drops to 2% on earnings above this amount. It means that basic-rate taxpayers will have to pay 8% in National Insurance contributions on any amount sacrificed above the £2,000 cap. Those earning over £50,270 will pay just 2%.

An employee with a £40,000 salary will not pay any more in National Insurance if they sacrifice 5% of their income into a pension, but will have to shell out £160 more if they double their contribution.

The most affected are those earning £52,000, making a 10% contribution, who will have to pay £256 extra in National Insurance from 2029. But someone earning just £4,000 more and contributing the same will pay £72.

Even higher earners will pay less in National Insurance than someone on a middle income. Someone earning £100,000 and contributing 10% will pay £160 more in National Insurance, or £60 if they put away 5%.

If an employee earning £52,000 cuts their contributions to 5%, they will still pay £48, while someone earning £56,000 will pay just £16 more.

Rachel Reeves also froze the student loan repayment thresholds for those with Plan 2 student loans, who attended university between 2012 and 2023.

Graduates pay 9% of their earnings above the threshold, which means that once the new salary sacrifice rules come into play, they will have to pay that same amount on their pension contributions if employers give up on salary sacrifice.

Tim Camfield, principal at pension consultants LCP said: "And, to make matters worse, the repeated freeze of tax thresholds could lead many of them to become higher-rate taxpayers for the first time in the coming years. This is truly a triple whammy for this group."

Despite the new rules, experts say salary sacrifice can still be an advantageous way to make it look as if you have a lower salary than you do, which makes you eligible for benefits you would otherwise lose.

Steve Webb, This Is Money's pension columnist and partner at LCP, said: "For those close to the £100,000 threshold, having a reduced salary can help you avoid losing help with childcare."

A reduced salary can also reduce the risk that your personal allowance starts to be tapered away if your salary would otherwise be over £100,000.