Salary Sacrifice
Salary sacrifice is an arrangement where you agree to give up part of your salary in exchange for a workplace benefit, such as increased pension contributions or childcare.
What it means
Salary sacrifice is an arrangement where you agree to give up part of your salary in exchange for a workplace benefit, such as increased pension contributions or childcare. Because your salary is lower, you may pay less Income Tax and National Insurance.
You agree to sacrifice £200 of your monthly salary into your workplace pension. Your take-home pay falls by less than £200 because you save tax and National Insurance.
Why it matters
It can be one of the most tax-efficient ways to contribute to a workplace pension.
Salary sacrifice reduces your official salary, which can affect things like mortgage affordability or life insurance linked to salary.
Does salary sacrifice mean I earn less?
Your contractual salary is lower, but you receive the value through workplace benefits instead.