Employee Benefits & Tax UK 2026/27 — BIK, P11D and Salary Sacrifice
Salary 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.