Salary Sacrifice

Salary sacrifice is a scheme through which you exchange a part of your salary with an extra benefit from your employer.

This means that the cash portion of your pay is now lower, so you pay less Income Tax and National Insurance. Your employer will not have to pay Employers’ National Insurance contributions on the part you sacrifice, either.

However, only certain benefits are eligible for a salary sacrifice scheme:

  • Childcare
  • Bicycle for work
  • Ultra-low emission car
  • Pension

Any other benefit will still be taxed. There are also a few other things to keep in mind about salary sacrifice schemes:

  • You’ll see your salary sacrifice on your payslip
  • You cannot lower your salary under the UK national minimum wage
  • Because the salary is now technically lower, this might affect things like mortgage applications (banks don’t care about non-cash benefits)

Frequently Asked Questions

  • Is a salary sacrifice the same as a benefit in kind?

    A benefit in kind is a non-cash reward that an employee may receive from their employer as part of their overall compensation – often known as perks. Many benefits in kind are completely tax free, such as a free meal or uniforms, but there are exceptions. To learn more about benefits in kind, see our handy glossary page!

  • How long should I be storing my Tax Records?

    In the UK, you must keep your tax records for at least six years from the end of the relevant tax year. Accounting software can help you to digitally store your records without taking up space in your office!

Search More Terms

View our latest news & insights

14 February 2024
Navigating the landscape of business taxes in the UK can seem daunting, especially given the range of taxes that might a...
Navigating the landscape of business taxes in the UK can seem daunting, especially given the range of taxes that might apply to your organization. However, understanding which taxes are relevant to your business is crucial for com...
17 January 2024
Your business has costs to deal with and pay as part of their day-to-day trade and as part of ad hoc strategies. They ty...
Your business has costs to deal with and pay as part of their day-to-day trade and as part of ad hoc strategies. They typically range from phone line bills, postage and stationery to computer software and travel costs. Being the o...