What is the deadline for arranging salary sacrifice on a bonus?

The salary sacrifice arrangement must be agreed with your employer before the bonus is paid — you cannot sacrifice income you have already constructively received. Speak to your HR or payroll team as early as possible, ideally at least a few weeks before your expected bonus payment date.

Does paying my bonus into a pension affect my annual allowance?

Yes — pension contributions from a bonus count toward your annual allowance. For 2026/27, the annual allowance is £60,000 (or 100% of your earnings, whichever is lower). If your total pension contributions for the year — including the bonus contribution — exceed this, you face an annual allowance charge.

Can I use carry forward to contribute a very large bonus?

Yes. If your bonus contribution would exceed this year's £60,000 allowance, you can carry forward unused allowance from the previous three tax years (provided you were a pension scheme member in those years). This can allow contributions of up to £200,000 in a single year in some cases. Your pension provider or an IFA can confirm your available carry-forward.

What if I am a higher-rate taxpayer who gets an extra 40% relief?

Higher-rate taxpayers making personal (non-salary-sacrifice) contributions claim basic rate relief automatically via their pension provider, then claim the additional 20% (making 40% total) through a self-assessment tax return. This effectively means a £10,000 pension contribution costs you £6,000 after tax. With salary sacrifice, the entire £10,000 stays outside your payslip and you save both income tax and National Insurance.

Can I Pay My Annual Bonus Into My Pension to Save Tax?

Yes — paying your annual bonus directly into your pension is one of the most tax-efficient moves available to UK employees. By routing your bonus into your pension before it hits your payslip (via salary sacrifice), you avoid income tax and National Insurance on the full amount. Even if you receive it first and make a personal contribution, you still benefit from substantial tax relief.

Two Methods: Salary Sacrifice vs Personal Contribution

Method	Tax saved	NI saved	Process
Salary sacrifice (before bonus paid)	Yes — at your marginal rate	Yes — employee NI (2–8%) + employer NI (15%)	Arranged with employer before bonus paid
Personal contribution (after bonus paid)	Yes — via tax relief claimed	No — NI already paid on full bonus	Contribute to pension; HMRC adds relief

Salary sacrifice is more tax-efficient because you avoid National Insurance on the sacrificed amount as well as income tax. Your employer also saves employer NI (15% on 2026/27), and some employers pass this saving on to you — worth asking about.

Worked Example: £10,000 Bonus

Scenario: Sarah earns £55,000/year. Her bonus this year is £10,000. She is a higher-rate taxpayer (40% on income above £50,270).

Option 1: Take the Bonus as Cash

	Amount
Gross bonus	£10,000
Income tax (40%)	−£4,000
Employee NI (2%)	−£200
Net bonus received	£5,800

Option 2: Salary Sacrifice (full £10,000 into pension)

	Amount
Pension contribution	£10,000
Income tax saved	£4,000
Employee NI saved	£200
Employer NI saved (15%)	£1,500
Total saving vs taking as cash	£4,200

Sarah effectively gets £10,000 into her pension pot — but the actual after-tax cost to her versus the alternative (cash) is just £5,800. That is a 72.4% uplift on her out-of-pocket cost.

Option 3: Personal Contribution (after receiving bonus)

Sarah receives £5,800 net. She contributes £8,000 to her SIPP.

HMRC adds basic rate relief: +£2,000 (gross contribution: £10,000)
Sarah claims additional 20% (higher rate) via self-assessment: +£2,000
Net cost of £10,000 pension contribution: £6,000

Personal contribution is less efficient than salary sacrifice because she has already paid NI on the bonus, but she still saves 40% income tax in total.

Annual Allowance Check

Before redirecting your bonus to your pension, confirm you will not breach the annual allowance:

Annual allowance 2026/27: £60,000 (or 100% of your earnings)
Money Purchase Annual Allowance (MPAA): £10,000 — applies only if you have flexibly accessed a pension already
Carry forward: Unused allowance from the previous three tax years can be added

If your normal annual contributions plus the bonus contribution exceed £60,000, you will face an annual allowance charge on the excess, which effectively cancels out the tax relief. Check your total contributions before proceeding.

How to Arrange a Bonus Salary Sacrifice

Speak to HR or payroll at least two to three weeks before your bonus payment date
Confirm the salary sacrifice agreement is updated in writing before the bonus is processed
The employer routes the sacrificed amount directly to your pension — it never appears on your payslip as gross pay
If your employer cannot arrange this in time, make a personal contribution instead — you still get full tax relief, just not the NI saving

Some employers require a formal amendment to your employment contract for salary sacrifice. This is a standard process and does not affect your employment rights for statutory purposes such as maternity pay.