Salary Sacrifice Explained – UK 2026/27

How salary sacrifice works in the UK. Learn how to save income tax and National Insurance through pension contributions and other salary sacrifice schemes.

How Salary Sacrifice Works

Salary sacrifice is an arrangement where you give up part of your gross salary in exchange for a non-cash benefit — most commonly pension contributions. Because the sacrifice reduces your gross pay, you pay less income tax and National Insurance.

• Basic rate savers: Save 20% income tax + 8% NI = 28% combined.
• Higher rate savers: Save 40% income tax + 2% NI = 42% combined on amounts above £50,270.
• Common uses: Pension contributions, cycle to work, electric vehicle schemes.