Salary sacrifice is an arrangement where an employee agrees to give up part of their salary in exchange for a non-cash benefit, such as extra pension contributions, cycle-to-work schemes, or childcare vouchers.
Tax and National Insurance savings
Because the sacrificed amount is no longer salary, both employee and employer can pay less tax and National Insurance, though the employee's salary reduction can affect other salary-linked entitlements.
Tax rules depend on individual circumstances and can change. This glossary is general information rather than personalised tax advice.