Question 1

What is salary sacrifice?

Accepted Answer

Salary sacrifice is an arrangement where you agree to give up part of your salary in exchange for a non-cash benefit from your employer, such as pension contributions, an electric car lease, or a bike through the cycle-to-work scheme. Because the sacrifice reduces your gross salary, you pay less income tax and National Insurance.

Question 2

How much can I save with salary sacrifice?

Accepted Answer

The savings depend on your tax rate. Basic rate taxpayers (20%) can save around 28-32% on benefits (20% tax + 8-12% NI). Higher rate taxpayers (40%) can save around 42% or more. Those earning between £100,000 and £125,140 can save up to 60% due to the personal allowance taper.

Question 3

Does salary sacrifice affect my mortgage application?

Accepted Answer

Yes, salary sacrifice reduces your gross salary on paper, which can affect mortgage affordability assessments. Some lenders may consider your pre-sacrifice salary, but many use the post-sacrifice figure. It's worth discussing with your mortgage broker or lender before committing to significant salary sacrifice arrangements.

Question 4

What is the BiK rate for electric cars?

Accepted Answer

For the 2025/26 tax year, pure electric vehicles (0g/km CO2) have a Benefit in Kind rate of just 3% of the list price. This is significantly lower than petrol or diesel cars, making EV salary sacrifice schemes very tax-efficient.

Question 5

Can salary sacrifice reduce my income below minimum wage?

Accepted Answer

No, your employer cannot legally reduce your salary below the National Minimum Wage through salary sacrifice. Our calculator will warn you if your proposed sacrifice would take your effective salary below this threshold.

Salary Sacrifice Calculator