1. What is Salary Sacrifice?

Salary sacrifice is an arrangement where an employee gives up part of their salary in exchange for non-cash benefits, such as pension contributions. This can reduce income tax and National Insurance contributions for both employee and employer.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• Gross Pay — Total salary before deductions
• Income Tax — Tax deducted based on UK tax bands
• National Insurance — Contributions based on UK NI rates
• Salary Sacrifice — Amount sacrificed for benefits

Explanation: The calculation shows how much take-home pay remains after standard deductions and salary sacrifice arrangements.

3. Benefits of Salary Sacrifice

Details: Salary sacrifice can increase pension contributions, reduce tax liabilities, and lower National Insurance payments while maintaining similar take-home pay.

4. Using the Calculator

Tips: Enter all values in GBP. The calculator requires positive values for all fields to compute the net pay after salary sacrifice.

5. Frequently Asked Questions (FAQ)

Q1: What can salary sacrifice be used for?
A: Common uses include pension contributions, childcare vouchers, cycle-to-work schemes, and ultra-low emission vehicles.

Q2: Are there limits to salary sacrifice?
A: Yes, salary cannot fall below the National Minimum Wage after sacrifice. Some benefits have annual limits.

Q3: How does salary sacrifice affect pension contributions?
A: Employer pension contributions from sacrificed salary aren't subject to income tax or National Insurance.

Q4: Does salary sacrifice affect mortgage applications?
A: Some lenders may consider pre-sacrifice salary, while others use post-sacrifice income.

Q5: Can salary sacrifice be changed or stopped?
A: Typically, changes can only be made at certain times unless there's a life event qualifying for a mid-year change.