Salary sacrifice can save real Income Tax and National Insurance, especially on pensions and electric cars, but it has trade-offs. We explain the savings clearly and check whether it makes sense for you.
Salary Sacrifice
Salary sacrifice means giving up part of your salary in exchange for a benefit, most commonly pension contributions or an electric car, paid from pre-tax salary. Because you never receive that salary, you save Income Tax and National Insurance on it, and your employer saves National Insurance too, which they may add to your benefit. It is one of the most efficient ways to fund a pension or drive an EV.
Your Tax Help Accountants shows you the exact Income Tax and National Insurance saving from a salary-sacrifice arrangement, whether pension, electric car or another benefit, and flags the trade-offs, such as the effect on borrowing, statutory pay and the National Minimum Wage floor. You decide with the full picture.
Salary-sacrifice pension contributions and electric cars are especially powerful because you save both Income Tax and National Insurance, and near £100,000 pension sacrifice can also restore your personal allowance, giving effective relief of around 60 per cent.
The Detail That Matters
Salary sacrifice swaps part of your gross salary for a non-cash benefit, most often a pension contribution, cutting both Income Tax and National Insurance. Done well it is one of the most efficient ways to save, and employers save National Insurance too.
You agree to a lower salary in exchange for an employer contribution or benefit. Because the sacrificed amount is never paid as salary, you save Income Tax and employee National Insurance on it, and the employer saves its National Insurance, which it may add to your benefit.
Sacrificing salary into your pension is the classic use: a basic-rate employee saves 20% tax plus 8% National Insurance, and a higher earner saves 40% plus 2%, on top of the employer's added National Insurance saving, far more efficient than paying in from net pay.
Salary sacrifice also works well for electric cars (taxed at just 3% benefit in kind), cycle-to-work, and additional pension, but not for most other benefits since the rules were tightened, so the efficient uses are now focused.
Because your salary is lower on paper, it can affect mortgage borrowing, statutory pay, and, if taken too far, drop you below the National Minimum Wage or reduce state-pension-qualifying earnings. We set the level carefully.
Salary sacrifice is underused for pensions and electric cars, where the National Insurance saving on top of tax relief is significant, yet people often keep paying into pensions from net pay and miss the extra saving.
Key Figures
How We Help
Sacrificing salary into your pension saves Income Tax and National Insurance, and near £100,000 restores your personal allowance too. We quantify the saving.
An electric car through salary sacrifice combines the low benefit-in-kind charge with pre-tax salary, making it strikingly efficient. We show you the numbers.
We flag the effects on mortgage borrowing, statutory pay and the minimum-wage floor, so you sacrifice only where it genuinely benefits you.
All the forms, calculations and correspondence handled on your behalf, so you never have to decode HMRC's rules or sit on hold.
A clear fixed fee quoted after a free call, your position explained in plain English, and never a surprise bill.
We act quickly, and where earlier years are involved we put those right too, reclaiming refunds or minimising penalties.
Salary sacrifice is powerful but not always right, it can affect borrowing, statutory maternity or sick pay, and cannot take you below the National Minimum Wage. We model the saving and the trade-offs so you make an informed choice.
Recent Client Outcome
An employee was contributing to their pension from net pay and paying for commuting, missing the National Insurance savings salary sacrifice offers.
What we did. We moved their pension contributions to salary sacrifice and arranged an electric car through a sacrifice scheme, with the employer adding its saved National Insurance to the pension.
The outcome. The pension contributions now saved Income Tax and National Insurance, boosted by the employer's added saving, and the electric car was taxed at just 3%, materially increasing their overall savings for the same cost.
Switching to salary sacrifice captured National Insurance savings they had been leaving on the table every month.
Why People Come to Us
Questions Answered
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