Ask PayslipIQ · Last reviewed 2026-05-08
What is salary sacrifice?
Salary sacrifice is a formal agreement with your employer to give up part of your gross salary in exchange for a non-cash benefit, most commonly extra pension contributions, an electric vehicle, or cycle-to-work. Because the sacrificed amount never counts as your earnings, you save income tax and National Insurance on it.
PayslipIQ provides educational information and estimated calculations only. It does not provide tax, legal, financial, payroll, accounting, pension, benefits or employment advice. Always verify your payslip, tax code, deductions and take-home pay with your employer's payroll department, HMRC, your pension provider, a qualified accountant, tax adviser or another appropriately qualified professional.
On a payslip, salary sacrifice usually shows as a lower gross pay figure rather than a deduction. Your employer's pension contribution then includes both their contribution and your sacrificed amount.
The savings are real but the sacrifice reduces your take-home in absolute terms. People sometimes mistake the lower gross figure for a pay cut.
Salary sacrifice can affect mortgage applications because lenders look at gross pay. The Pro Report PDF includes both the gross pay shown on the payslip and an effective gross figure that adds back salary sacrifice, which some brokers find useful.
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Reviewed by PayslipIQ Editorial. Sources cited where applicable.
PayslipIQ provides educational information and estimated calculations only. It does not provide tax, legal, financial, payroll, accounting, pension, benefits or employment advice. Always verify your payslip, tax code, deductions and take-home pay with your employer's payroll department, HMRC, your pension provider, a qualified accountant, tax adviser or another appropriately qualified professional.