1. What is Salary Sacrifice?

Salary sacrifice is an arrangement where an employee gives up part of their salary in exchange for a non-cash benefit, such as a company car. This reduces taxable income, potentially lowering income tax and National Insurance contributions.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( Gross\ Pay \) — Annual salary before deductions
• \( Income\ Tax \) — Calculated using UK tax bands (20%/40%)
• \( National\ Insurance \) — Calculated using NI rates (12%/2%)
• \( Car\ Sacrifice \) — Amount sacrificed for company car

3. UK Tax and NI Calculation

Income Tax (2023/24 rates):

• 0% on income up to £12,570 (Personal Allowance)
• 20% on income between £12,571-£50,270 (Basic Rate)
• 40% on income between £50,271-£125,140 (Higher Rate)
• 45% on income above £125,140 (Additional Rate)

National Insurance (2023/24 rates):

• 0% on income up to £12,570
• 12% on income between £12,571-£50,270
• 2% on income above £50,270

4. Using the Calculator

Tips: Enter your gross annual salary and the amount you're sacrificing for the company car. The calculator will show your estimated net pay after tax, NI, and car sacrifice deductions.

5. Frequently Asked Questions (FAQ)

Q1: Is salary sacrifice worth it for a car?
A: It depends on your circumstances. Salary sacrifice can save tax and NI, but you'll have less take-home pay. It's often beneficial for higher-rate taxpayers.

Q2: Does salary sacrifice affect pension contributions?
A: Yes, since pension contributions are typically based on your reduced salary. Check with your employer about pension implications.

Q3: Are there minimum wage considerations?
A: Yes, your salary after sacrifice must not take you below the National Minimum Wage.

Q4: What other benefits can be salary sacrificed?
A: Common options include pensions, childcare vouchers, bikes, and technology.

Q5: Can I opt out of salary sacrifice?
A: Typically yes, but check your employment contract. There may be notice periods or restrictions.