What is salary sacrifice?

Salary sacrifice is when you agree to exchange part of your employment salary for other benefits, such as:

  • additional pension contributions
  • childcare
  • cycle to work schemes
  • an ultra-low emissions car
These types of things are generally called ‘non-cash’ benefits.

Why would I sacrifice part of my salary?

If you enter into a salary sacrifice your salary will be lower - so you’ll pay less tax and national insurance. You’ll also receive some other non-cash benefit in return. 
This can be especially useful if you are earning just over the trigger points of £50,000 (for recipients of child benefit) or £100,000. This is because you start paying tax at higher marginal rates past those thresholds, but a salary sacrifice could be used to reduce this. 
For example, if you are offered a bonus that takes your salary above £100,000, you could ask for some or all of your bonus to be paid into your pension, instead of having it paid to you with your salary. This could have a significant reduction on the level of tax you’ll need to pay – see our blog for more information about this.
Your employer also doesn’t have to pay employers national insurance on the part of your salary or bonus you sacrifice. Some employers will agree to pass on some or all of this saving to you! 

How do I sacrifice part of my salary?

If you want to explore salary sacrifice options you should speak to your employer to see what options are available to you. Many employers now offer salary sacrifice schemes.

How can untied help?

untied gives you the tools and information to help you make the tax choices that are best for your circumstances. Our app lets you see your estimated tax and national insurance liability before the tax year ends, and we’re also here to answer your questions and help you make sense of your tax affairs. When the time comes to file your tax return with HMRC you can do this quickly and effortlessly with untied. You can sign up for an untied account on this page.

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