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. This can reduce income tax and National Insurance contributions for both employee and employer.

2. How the Calculator Works

The calculator uses the following formula:

Where:

• Gross Pay — Your total salary before any deductions
• Income Tax — Amount deducted for UK income tax
• National Insurance — Amount deducted for NI contributions
• Salary Sacrifice — Amount sacrificed for benefits

3. Benefits of Salary Sacrifice

Details: Salary sacrifice can reduce your taxable income, potentially lowering your tax bracket and National Insurance contributions. Common sacrifices include pension contributions, childcare vouchers, and cycle-to-work schemes.

4. Using the Calculator

Tips: Enter your annual gross salary in GBP, estimated income tax, National Insurance contributions, and the amount you wish to sacrifice. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is salary sacrifice right for everyone?
A: No, it depends on individual circumstances. Those near minimum wage or certain benefit thresholds should seek advice.

Q2: How does salary sacrifice affect my pension?
A: Pension contributions through salary sacrifice can be more tax-efficient as they reduce your taxable income.

Q3: Can I change my salary sacrifice amount?
A: Typically only during set enrollment periods or following a "life event" like marriage or childbirth.

Q4: Does salary sacrifice affect my take-home pay?
A: Yes, it reduces your taxable pay but you receive benefits instead of cash.

Q5: Are there limits to salary sacrifice?
A: Yes, your pay after sacrifice cannot fall below the National Minimum Wage.