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