📊 Without Salary Sacrifice
✅ With Salary Sacrifice
How Salary Sacrifice Works
Salary sacrifice means you agree to a lower gross salary in exchange for a non-cash benefit (like extra pension contributions or a bike). Because your gross salary is reduced before tax and NI are calculated, you pay less tax and NI — effectively getting the benefit at a discount.
Example: If you sacrifice £3,000 from a £40,000 salary for pension, your taxable salary drops to £37,000. You save 20% income tax (£600) and 8% employee NI (£240) on that £3,000 — a total saving of £840. Your employer also saves 15% NI (£450) and may pass some of that saving on to you.
Yes — lenders look at your gross salary, which will be lower after sacrifice. Some lenders add back pension sacrifice contributions. Discuss with your mortgage broker before committing to large salary sacrifice amounts.
No. Your cash salary after sacrifice cannot fall below the National Minimum/Living Wage. For 2025/26, the National Living Wage is £12.21 per hour for workers aged 21+.
Only if your salary drops below the NI Lower Earnings Limit (£6,396 for 2025/26). Above that, your state pension entitlement is unaffected.