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 reduces taxable income, potentially lowering income tax and National Insurance contributions.

2. How Tax Calculation Works

The calculator uses the following formula:

Where:

• Income Tax - Calculated based on UK tax bands after deducting salary sacrifice
• National Insurance - Calculated on reduced salary amount
• Sacrifice Savings - Reduction in tax and NI from the sacrificed amount

3. Benefits of Salary Sacrifice

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

4. Using the Calculator

Tips: Enter your gross annual salary, the amount you wish to sacrifice, and select the tax year. The calculator will show your potential tax savings.

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 take-home pay?
A: Yes, your gross salary is reduced, but the benefit you receive may offset this reduction, often resulting in net gain.

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

Q4: Does it affect my state pension?
A: Reducing NI contributions could potentially affect your state pension entitlement, though the impact is usually small.

Q5: Can I opt out of salary sacrifice?
A: Typically, salary sacrifice arrangements are contractual changes, but many schemes allow you to opt out in certain circumstances.