The short version: Salary sacrifice is where you give up part of your salary in exchange for a benefit from your employer. You pay less tax and NI because your official salary is lower.
What benefits qualify?
Pension contributions, cycle to work schemes, ultra low emission cars, and childcare vouchers (for existing members). Most other benefits don’t qualify and would be taxed as normal.
What’s the advantage?
Both you and your employer save National Insurance. For pensions especially, this can mean more going into your pot for the same cost to your employer.
Any downsides?
Your official salary is now lower, which might affect things like mortgage applications (lenders look at salary, not benefits), statutory maternity pay, and other entitlements based on earnings.
Also, you can’t sacrifice below the National Minimum Wage.
Considering salary sacrifice for pension or other benefits? Ask us whether it makes sense for your situation.
