Understanding Salary Sacrifice
Salary sacrifice is an arrangement where you agree to reduce your gross salary in exchange for a non-cash benefit from your employer, such as pension contributions, cycle-to-work schemes, or electric vehicle leases. Because the sacrifice happens before tax and NI are calculated, you pay less in deductions.
Why It Saves You Money
Unlike personal pension contributions (which only get income tax relief), salary sacrifice also saves National Insurance for both you and your employer. For a 40% taxpayer, sacrificing £1,000 saves £400 in income tax plus £80 in employee NI — meaning the £1,000 benefit costs only £520 in take-home pay. Your employer also saves £138 in employer NI.
Frequently Asked Questions
Does salary sacrifice affect my mortgage application?▾
Yes, it can. Mortgage lenders typically base affordability on your gross salary after sacrifice. If you sacrifice a large amount, your reported salary will be lower. Some lenders will add back pension contributions, but this varies. Check with your mortgage advisor before making large sacrifices.
Can I sacrifice below the National Minimum Wage?▾
No. Your post-sacrifice cash salary must not fall below the National Minimum Wage for your age group. Your employer should ensure any sacrifice arrangement complies with this requirement.
What benefits can be salary sacrificed?▾
Common salary sacrifice benefits include pension contributions, cycle-to-work schemes, electric vehicle leases (BiK rules apply), and workplace nursery places. Since 2017, most other benefits (e.g. mobile phones, gym memberships) no longer have NI advantages under the Optional Remuneration Arrangement (OpRA) rules.
Calclypso Editorial Team
Calculations verified against HMRC 2025-26 rates. Last updated: April 2026. This calculator is for estimation purposes only.