Salary sacrifice

Salary sacrifice is an arrangement where an employee agrees to give up part of their gross salary before taxes in exchange for certain benefits, such as a pension contribution, a company car, or additional leave. This means the employee’s taxable income is reduced, which can lower the amount of income tax and National Insurance they pay. While the employee benefits from potential tax savings, their take-home pay decreases by the sacrificed amount. Employers also benefit by reducing their payroll taxes and potentially offering more attractive benefits to staff. It's a flexible way to prioritize benefits while managing tax efficiency.