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 simple formula:

Where:

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

Explanation: The calculation shows your take-home pay after all deductions including any salary sacrifice arrangements.

3. Benefits of Salary Sacrifice

Details: Salary sacrifice can reduce your taxable income, lower National Insurance contributions, and provide tax-efficient benefits like pension contributions, childcare vouchers, or cycle-to-work schemes.

4. Using the Calculator

Tips: Enter all amounts in GBP. The calculator works with annual figures. Ensure all values are positive numbers for accurate results.

5. Frequently Asked Questions (FAQ)

Q1: What benefits can I get through salary sacrifice?
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 if your pension is based on your salary. Check with your employer about how salary sacrifice affects your pension calculations.

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

Q4: Can I change my salary sacrifice arrangement?
A: Typically only during certain times of year (like annual benefits renewal) or after a "life event" like having a child.

Q5: Is salary sacrifice right for everyone?
A: It depends on your circumstances. Those near benefit thresholds or applying for mortgages should consider potential impacts carefully.