What can I sacrifice my salary for?

Common schemes are pension contributions, cycle-to-work, electric or other low-emission cars, and (for people who joined before 4 October 2018) childcare vouchers. For most other benefits, a new arrangement is taxed on the higher of the salary given up and the normal benefit-in-kind value, so the tax saving largely disappears.

How much tax do I save?

The sacrifice is deducted before Income Tax and National Insurance, so you save both. In England, Wales and Northern Ireland: basic rate 28% (20% Income Tax + 8% NI), higher rate 42% (40% + 2% above the Upper Earnings Limit), additional rate 47%. Scottish taxpayers save at Scottish Income Tax rates; the calculator applies them.

Are there any downsides?

A lower cash salary can reduce statutory payments such as Statutory Maternity Pay, and earnings-related or contribution-based benefits. If it takes your earnings below the Lower Earnings Limit (£6,708 a year in 2026/27) you can lose the National Insurance record for State Pension. Employers decide whether pay rises, overtime and pension contributions use the old or reduced salary.

Is salary sacrifice always allowed?

Your employer has to offer it and change your employment contract, and you have to agree. HMRC will not comment on a proposed arrangement before it is in place. A salary sacrifice arrangement must not reduce your cash earnings below the National Minimum Wage rates.

Does this include employer NI savings?

We model only your personal tax and NI saved. Your employer also saves 15% secondary NI on the sacrificed amount, and some employers pass part of that into your pension. From April 2029 only the first £2,000 a year of pension contributions made by salary sacrifice will be free of NI.

Salary Sacrifice on a £35,000 Salary 2026/27

On a £35,000 UK gross salary, salary sacrifice reduces taxable pay pound for pound - so the headline sacrifice value escapes Income Tax + employee NI at your marginal rate. The net cost to your take-home is materially less than the headline sacrifice. Below shows 5%, 10% and 15% of salary sacrificed (pension or other benefit).

5% sacrifice

£1,750

Costs £1,260 take-home, saves £490 (28%)

10% sacrifice

£3,500

Costs £2,520 take-home, saves £980 (28%)

15% sacrifice

£5,250

Costs £3,780 take-home, saves £1,470 (28%)

Take-home comparison at £35,000

Scenario	Sacrificed	Take-home	Net cost vs zero sacrifice
No sacrifice	£0	£28,720	-
5% sacrifice	£1,750	£27,460	£1,260
10% sacrifice	£3,500	£26,200	£2,520
15% sacrifice	£5,250	£24,940	£3,780

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Frequently asked questions

What can I sacrifice my salary for?: Common schemes are pension contributions, cycle-to-work, electric or other low-emission cars, and (for people who joined before 4 October 2018) childcare vouchers. For most other benefits, a new arrangement is taxed on the higher of the salary given up and the normal benefit-in-kind value, so the tax saving largely disappears.
How much tax do I save?: The sacrifice is deducted before Income Tax and National Insurance, so you save both. In England, Wales and Northern Ireland: basic rate 28% (20% Income Tax + 8% NI), higher rate 42% (40% + 2% above the Upper Earnings Limit), additional rate 47%. Scottish taxpayers save at Scottish Income Tax rates; the calculator applies them.
Are there any downsides?: A lower cash salary can reduce statutory payments such as Statutory Maternity Pay, and earnings-related or contribution-based benefits. If it takes your earnings below the Lower Earnings Limit (£6,708 a year in 2026/27) you can lose the National Insurance record for State Pension. Employers decide whether pay rises, overtime and pension contributions use the old or reduced salary.
Is salary sacrifice always allowed?: Your employer has to offer it and change your employment contract, and you have to agree. HMRC will not comment on a proposed arrangement before it is in place. A salary sacrifice arrangement must not reduce your cash earnings below the National Minimum Wage rates.
Does this include employer NI savings?: We model only your personal tax and NI saved. Your employer also saves 15% secondary NI on the sacrificed amount, and some employers pass part of that into your pension. From April 2029 only the first £2,000 a year of pension contributions made by salary sacrifice will be free of NI.