How It Works
You voluntarily give up part of your future salary. In return, your employer provides a benefit (like a pension contribution or a car).
Because your "gross salary" is lower, you pay less:
- Income Tax
- National Insurance (which you don't save with other relief methods)
- Student Loan Repayments
Top Uses
Pension Contributions
The most common use. Employer pays directly into your pension. You get full tax relief immediately without claiming it back.
Electric Vehicles (EVs)
Lease a brand new EV from your gross pay. Benefit in Kind tax is only 2% (until April 2025), making it incredibly cheap compared to buying personally.
Warning
Salary sacrifice reduces your "contractual salary". This can affect:
- Mortgage affordability (though many lenders accept the pre-sacrifice amount).
- Life cover (if based on salary multiples).
- Maternity pay calculations.