Workers reluctant to pay the taxman hundreds of pounds in extra National Insurance contributions next month can swerve the tax with a little-known pension savings trick. 

Pensions are well known for being tax efficient and making full use of them can significantly cut the amount paid in National Insurance, as well as income tax. Savers can shield up to £331 from tax by opting to increase their monthly contributions.

The Government has insisted that National Insurance will increase by 1.25 percentage points in April, equivalent to a jump of more than 10pc for many, as Britain’s tax burden grows to its highest in 70 years. Millions of workers will pay hundreds of pounds extra in tax, at the height of a major cost of living crisis, with someone earning £50,000 paying an additional £506 each year.

However, there are ways to protect some of your savings from the HM Revenue & Customs.The average worker will have 8pc of their salary paid into their pension each year – including an employer contribution of 3pc of the salary. This is the minimum contribution for defined contribution pensions. But many businesses offer “salary sacrifice”, an agreement between the employee and employer to add a portion of their salary directly to their pension before it is taxed. 

This is extremely tax efficient, as the salary exchanged is not liable for income tax or National Insurance. Employees receive a lower salary once the pension is deducted, which means they pay less income tax and National Insurance contributions on their earnings. However, they significantly boost their savings by doing so. 

Someone earning £30,000 a year who contributes an extra £100 a month into their pension via salary sacrifice would save £158 in National Insurance each year, according to calculations from pension provider Penfold. A worker earning £50,000 would keep £331.25 from going towards tax bills, based on 2022-23 tax rates.