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TAX TIP TUESDAY: Salary Sacrifice Remains a Winner

Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.


This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 


Two years ago, when regulation changes were introduced, many thought that salary sacrifice — which requires employees to give up a portion of their salary in exchange for benefits, additional tax savings, and National Insurance savings — would fall by the wayside. However, quite the opposite has occurred.

In 2017, pension contributions (including additional death-in-service cover under a flex scheme), employer-funded regulated individual pension advice, Childcare Voucher schemes, Cycle to Work schemes, and holiday “buy” schemes became the benefits available under salary sacrifice. These benefits offered by employers have experienced a surge in popularity since then.

While initially unsure about pursuing this option due to potential interference from the Chancellor, employers and employees alike have fully embraced salary sacrifice.


The popularity of pensions

Pensions in particular have done well after auto-enrolment contribution levels rose from 2% to 5% because of the ability to save 13.8% in NI on employees’ pension contributions.

Due to the restructuring, companies are now saving even more money with a portion of their employee’s salary being sacrificed to offset the uptick in contributions. It’s a little-known fact, but NI relief is actually available even for products that have been impacted by rule changes, as long as the benefit can’t be converted in cash. Depending on their earnings, employees could potentially save 2% or even 12%.


The benefits for employees

While employers are certainly celebrating the benefits, the positive experience for employees cannot be forgotten. The big draw, it seems, for salary sacrifice is the fact that employees can spread out the cost of whichever benefit they are buying over the course of the year, rather than getting hit with one massive bill. Many don’t have the ability nor the credit to weather a cost like that, but with salary sacrifice they don’t need to worry about how good their credit score is to secure the benefit of their choosing; they can have their payments conveniently and regularly deducted from their pay.

Another tick in the win column is that employers thoroughly vet any suppliers they work with so they are able to negotiate bulk discounts and employees have peace of mind that the products they’re getting are good quality.


Contact us

Whether you’re an employee or an employer interested in utilising salary sacrifice, don’t hesitate to get in touch with a team member today. We can help you understand whether or not it’s right for you and help you take the steps to put your plan into action.


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