Will salary sacrifice save tax?

Salary sacrifice is an agreement to reduce an employee’s pre-tax salary. The most common uses of a salary sacrifice scheme are for childcare, travel and pension contributions.  

Introducing a salary sacrifice scheme can be complex and you may need help setting it up, including with HR actions, as all employee contracts will need to be updated. 

When it comes to salary sacrifice pension contributions, because the deductions are taken from a salary before tax, there can be some tax and NI savings for both employees and employers.  

It can also be helpful for some employees as it can spread the cost of larger costs, such as the purchase of a bike for work, into manageable chunks. 

However, it is important for employees to consider the impact of salary sacrifice. Because they are sacrificing their salary, when it comes to applying for a mortgage or any other credit, the amount they can borrow could be impacted. 

You must give employees all the information they need to make an informed decision on whether they would like to use salary sacrifice or not. Salary sacrifice is voluntary so you aren’t able to enrol employees in this way unless they approve. 

How TaxAssist Accountants can help 

TaxAssist Accountants are your go-to business experts, speak to our accountants today for more ways to save tax. Call 01582 945 622 or use our online contact form.

First published 5 Feb 2025

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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