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Salary sacrifice

Salary sacrifice is a scheme through which you exchange a part of your salary with an extra benefit from your employer.

This means that the cash portion of your pay is now lower, so you pay less Income Tax and National Insurance. Your employer will not have to pay Employers’ National Insurance contributions on the part you sacrifice, either.

However, only a few benefits are eligible for a salary sacrifice scheme:

  • childcare
  • bicycle for work
  • ultra-low emission car
  • pension

Any other benefit will still be taxed.

A few other things to keep in mind about salary sacrifice schemes:

  • you’ll see your salary sacrifice on your payslip
  • you cannot lower your salary under the UK national minimum wage
  • because the salary is now technically lower, this might affect things like mortgage applications (banks don’t care about non-cash benefits)

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