UK Budget 2025: Comments on carried interest changes and salary sacrifice

Elliot Weston, corporate and finance partner: “From 6 April 2026 the revised tax regime in relation to individuals performing investment management services will bring carried interest into the charge to income tax. Under the revised regime, the amount of carried interest subject to income tax and NICs will be adjusted by a multiplier of 72.5% where qualifying conditions are met, delivering an effective tax rate of 34.075%.” 

“The government has confirmed today that it will implement limitations on the territorial scope of the revised regime such that any investment management services performed in the UK by a non-UK resident individual will not be subject to UK tax where the individual spends fewer than 60 days in the tax year performing investment management services in the UK. In addition, a non-UK resident investment manager may be entitled to relief under a double tax treaty if they do not have a fixed place of business in the UK.” 

“Following the consultation on the draft legislation published in July 2025, we understand that a number of changes have been made, with the revised draft legislation due to be published next week.”

Jill Clucas, counsel knowledge lawyer: “While many basic rate taxpayers are unlikely to contribute more than £2,000 per year to their pension, those who do so will be disproportionally impacted by the changes. An individual earning £35,000 per year who chooses to pay 10% pension contributions (£3,500) via salary sacrifice would have to pay additional NICs of £120 per year (8% x £1,500).  In contrast, a higher rate taxpayer contributing £3,500 per year would pay additional NICs of only £30 (2% x £1,500).”

“For higher rate taxpayers in schemes operating relief at source (used by personal pension arrangements), continuing to pay pension contributions via salary sacrifice will ensure that they benefit from higher rate tax relief, without having to claim via their self-assessment tax return.  It will also ensure that the benefit of the higher rate relief goes into their pension fund, rather than being taken as additional income.”