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 Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( Gross\ Pay \) — Total salary before deductions
• \( Income\ Tax \) — Tax based on 2025 UK tax brackets
• \( National\ Insurance \) — Employee NI contributions
• \( Salary\ Sacrifice \) — Amount sacrificed for benefits

Explanation: The calculation shows your take-home pay after accounting for standard deductions plus any salary sacrifice arrangements.

3. Benefits of Salary Sacrifice

Details: Salary sacrifice can reduce your taxable income, potentially lowering your tax bracket and National Insurance contributions while providing valuable benefits like pension contributions, childcare vouchers, or cycle-to-work schemes.

4. Using the Calculator

Tips: Enter your gross annual salary, estimated income tax (use HMRC calculator if unsure), National Insurance contributions, and the amount you plan to sacrifice. All values must be in GBP.

5. Frequently Asked Questions (FAQ)

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

Q2: Does salary sacrifice affect my pension?
A: It can increase your pension contributions but may affect calculations for benefits based on earnings like maternity pay.

Q3: Is there a minimum wage consideration?
A: Yes, your pay after sacrifice cannot take you below the National Minimum Wage.

Q4: Can I change my sacrifice amount?
A: Typically only during set periods or with life events, depending on your employer's scheme rules.

Q5: Are all benefits tax-free?
A: Most are tax-advantaged but some benefits may have taxable elements - check with your employer.