1. What is PAYE With Salary Sacrifice?

PAYE (Pay As You Earn) is the UK system for collecting Income Tax and National Insurance from employment income. Salary sacrifice is an arrangement where an employee gives up part of their salary in exchange for benefits, reducing their taxable income.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( \text{Gross Pay} \) — Total salary before deductions (GBP/year)
• \( \text{Income Tax} \) — Calculated income tax amount (GBP)
• \( \text{National Insurance} \) — NI contributions (GBP)
• \( \text{Salary Sacrifice} \) — Amount sacrificed for benefits (GBP)

Explanation: The calculation shows take-home pay after all mandatory deductions and voluntary salary sacrifice arrangements.

3. Importance of Net Pay Calculation

Details: Understanding net pay helps employees budget effectively and assess the impact of salary sacrifice arrangements on their take-home pay.

4. Using the Calculator

Tips: Enter all amounts in GBP. Ensure values are accurate for correct net pay calculation. Salary sacrifice amounts must be pre-agreed with employer.

5. Frequently Asked Questions (FAQ)

Q1: What benefits are typically included in salary sacrifice?
A: Common benefits include pension contributions, childcare vouchers, cycle-to-work schemes, and ultra-low emission vehicles.

Q2: Does salary sacrifice reduce National Insurance?
A: Yes, both employee and employer NI contributions are typically reduced as the sacrificed amount is not subject to NI.

Q3: Are there limits to salary sacrifice?
A: Yes, salary cannot fall below National Minimum Wage after sacrifice. Some benefits have annual limits.

Q4: How does salary sacrifice affect pension contributions?
A: Pension contributions via salary sacrifice are often more tax-efficient as they avoid both income tax and NI.

Q5: Can salary sacrifice be changed mid-year?
A: Changes are typically only allowed at certain times unless there's a "life event" like marriage or birth of a child.