Employee Benefits & Tax UK 2026/27 — BIK, P11D and Salary SacrificeSalary Sacrifice Calculator UK 2026 — Pension, Bike & EV Schemes
Calculate how much you save with salary sacrifice schemes. Pension contributions, Cycle to Work, electric car schemes — see your real savings.
Salary sacrifice schemes let you exchange part of your salary for benefits, saving tax and National Insurance. Here’s how much you could save.
Read more: See our Take Home Pay guide for a complete overview of this topic.
How Salary Sacrifice Works
The Basic Principle
| Without Salary Sacrifice | With Salary Sacrifice |
|---|
| Earn £50,000 | Agree to £45,000 salary |
| Pay tax and NI on £50,000 | Pay tax and NI on £45,000 |
| Buy benefit from net pay | Employer provides £5,000 benefit |
| Less efficient | More efficient |
What You Save
| Tax Band | Income Tax Saved | NI Saved | Total Saving |
|---|
| Basic rate (20%) | 20% | 8% | 28% |
| Higher rate (40%) | 40% | 2% | 42% |
| Additional rate (45%) | 45% | 2% | 47% |
Plus employer saves 13.8% NI — often passed to you as extra contribution.
Pension Salary Sacrifice
How It Works
| Step | What Happens |
|---|
| 1 | You agree to reduce salary by pension amount |
| 2 | Employee NI saved (8% or 2%) |
| 3 | Employer NI saved (13.8%) |
| 4 | Employer often adds their NI saving to your pension |
| 5 | More goes into your pension |
Pension Salary Sacrifice Calculator
Example: £5,000 pension contribution
| Method | Basic Rate Taxpayer | Higher Rate Taxpayer |
|---|
| Normal Contribution | | |
| Your contribution | £5,000 | £5,000 |
| Tax relief added | £1,250 (auto) | £1,250 (auto) + £1,250 (claim) |
| In pension | £6,250 | £6,250 |
| Your net cost | £4,000 | £3,000 |
| Salary Sacrifice | | |
| Salary reduction | £5,000 | £5,000 |
| In pension | £5,000 + employer NI | £5,000 + employer NI |
| If employer adds 13.8% NI | £5,690 | £5,690 |
| Your net cost | £3,600 | £2,900 |
| Extra benefit | £440 | £440 |
Full Savings Table
| Salary | Contribution | Normal Cost to You | Salary Sacrifice Cost | Saving |
|---|
| £30,000 (basic) | £3,000 | £2,400 | £2,160 | £240 |
| £30,000 (basic) | £6,000 | £4,800 | £4,320 | £480 |
| £60,000 (higher) | £5,000 | £3,000 | £2,550 | £450 |
| £60,000 (higher) | £10,000 | £6,000 | £5,100 | £900 |
| £100,000 (higher) | £20,000 | £12,000 | £10,200 | £1,800 |
Assumes employer adds their 13.8% NI saving.
Why Employers Offer It
| Employer Benefit | Detail |
|---|
| Saves 13.8% NI | On sacrificed salary |
| Attracts talent | Better benefits package |
| No extra cost | If they keep NI saving |
| Can share saving | Adds to your pension |
Cycle to Work Scheme
How It Works
| Step | What Happens |
|---|
| 1 | Choose bike and safety equipment |
| 2 | Employer buys it |
| 3 | You “hire” it via salary sacrifice (12-18 months) |
| 4 | At end, buy bike for small fee (typically 3-7%) |
Cycle to Work Savings
| Bike Cost | Tax Rate | Monthly Sacrifice (12m) | Real Cost | Saving |
|---|
| £500 | Basic (28%) | £42 | £360 | £140 (28%) |
| £500 | Higher (42%) | £42 | £290 | £210 (42%) |
| £1,000 | Basic (28%) | £83 | £720 | £280 (28%) |
| £1,000 | Higher (42%) | £83 | £580 | £420 (42%) |
| £2,000 | Basic (28%) | £167 | £1,440 | £560 (28%) |
| £2,000 | Higher (42%) | £167 | £1,160 | £840 (42%) |
| £5,000 | Higher (42%) | £417 | £2,900 | £2,100 (42%) |
E-Bike Example
| E-bike Value | £2,500 |
|---|
| Your tax rate | Higher (40%) |
| Salary sacrifice (12 months) | £208/month |
| Total sacrifice | £2,500 |
| Tax saved (40%) | £1,000 |
| NI saved (2%) | £50 |
| Effective cost | £1,450 |
| Saving | £1,050 (42%) |
End of Scheme
| Option | What Happens |
|---|
| Buy the bike | Pay “fair market value” (3-7% typically) |
| Extend hire | Continue small payments |
| Return bike | Rarely done |
Electric Car Salary Sacrifice
How It Works
| Step | What Happens |
|---|
| 1 | Choose electric car from approved list |
| 2 | Employer leases it |
| 3 | You sacrifice salary for lease + insurance + maintenance |
| 4 | Pay Benefit in Kind tax (very low for EVs) |
| 5 | At end: return, buy, or new car |
Why EVs Work So Well
| Factor | Petrol/Diesel | Electric |
|---|
| BIK rate 2026/27 | 20-37% | 3% |
| Tax you pay | High | Very low |
| Salary sacrifice benefit | Reduced by BIK | Barely reduced |
EV Salary Sacrifice Calculator
Example: £35,000 electric car
| Monthly Lease Cost | £450 |
|---|
| Gross salary sacrifice | £450/month |
| Annual sacrifice | £5,400 |
| BIK value (3% of £35,000) | £1,050 |
| BIK tax (higher rate) | £420/year (£35/month) |
| Your real cost | £485/month |
What you get for £485/month:
- Brand new EV
- Insurance
- Maintenance
- Road tax
- Breakdown cover
- Tyres (often)
Comparison: Salary Sacrifice vs Buy/PCP
| Method | Monthly Cost | 3-Year Total |
|---|
| Salary sacrifice (after tax) | £350 net | £12,600 |
| PCP (from net salary) | £400 + extras | £18,000+ |
| Bank loan | £600+ | £21,600+ |
| Cash purchase | £35,000 upfront | Depreciation ~£15,000 |
Salary sacrifice often 30-50% cheaper than alternatives.
Real-World EV Examples
| Car | List Price | Gross Monthly | Net Cost (Higher Rate) |
|---|
| MG4 | £27,000 | £350 | ~£250 |
| Tesla Model 3 | £40,000 | £550 | ~£380 |
| BMW iX1 | £52,000 | £700 | ~£480 |
| Kia EV6 | £45,000 | £600 | ~£410 |
Net cost after tax/NI savings, including BIK.
Other Salary Sacrifice Benefits
Common Schemes
| Benefit | Typical Saving | Notes |
|---|
| Childcare vouchers | 32-47% | Closed to new joiners |
| Gym membership | 28-42% | Some employers offer |
| Technology scheme | 28-42% | Phones, laptops |
| Car parking | 28-42% | At workplace |
| Health screening | 28-42% | Annual checks |
Childcare Vouchers (Legacy)
| If You Joined Before Oct 2018 | Saving |
|---|
| Basic rate | Up to £933/year |
| Higher rate | Up to £624/year |
| Additional rate | Up to £590/year |
No new joiners — replaced by Tax-Free Childcare.
Impact on Other Things
What Salary Sacrifice Affects
| Impact Area | Effect | Severity |
|---|
| Mortgage applications | Lower gross salary | Medium |
| Statutory benefits | Based on lower salary | Low |
| State Pension | Still builds if above LEL | Usually none |
| Other borrowing | Lower income shown | Low-Medium |
| Pay rises | Usually percentage of new salary | None |
Mortgage Lender Treatment
| Lender Approach | How They Handle It |
|---|
| Add back | Add pension sacrifice back to income |
| Ignore | Use lower gross salary |
| Varies | Depends on scheme type |
Tip: Check lender policy before large salary sacrifice near mortgage application.
Minimum Wage Protection
| Rule | Detail |
|---|
| Can’t go below NMW | After sacrifice |
| Employer should check | Usually automatic |
| 2026/27 NMW | £11.44/hour (21+) |
When Salary Sacrifice Works Best
Ideal For
| Situation | Why |
|---|
| Higher/additional rate taxpayer | Maximum tax saving |
| Employer adds NI saving | Extra pension boost |
| EV scheme available | Huge savings |
| Not applying for mortgage soon | No income impact |
Less Ideal For
| Situation | Why |
|---|
| Close to NMW | Limited headroom |
| Applying for mortgage | Reduces gross salary |
| Claiming benefits | May affect entitlement |
| Employer keeps NI saving | Still saves, but less |
How to Set Up
Pension Salary Sacrifice
| Step | Action |
|---|
| 1 | Check if employer offers it |
| 2 | Complete salary sacrifice form |
| 3 | Agreement amends your contract |
| 4 | Lower salary, higher pension shows on payslip |
Cycle to Work / EV
| Step | Action |
|---|
| 1 | Check which schemes employer offers |
| 2 | Choose bike/car from approved provider |
| 3 | Get quote |
| 4 | Employer approves |
| 5 | Salary sacrifice begins |
Key Takeaways
- Salary sacrifice saves tax AND NI — unlike normal pension relief
- Higher earners save more — 42-47% vs 28%
- EV schemes are exceptional value — 3% BIK makes them cheap
- Cycle to Work — save 28-42% on a bike
- Check mortgage impact — if applying soon
- Ask employer about NI sharing — for pensions
For related content, see our pension guide, take-home pay calculator, and tax-efficient investing.