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Salary sacrifice - the tax hack that gives back.

Keep more of your hard-earned cash by taking advantage of a government-backed tax incentive for employees.

Choose salary sacrifice
Four employees smiling and looking down at a laptop

What is salary sacrifice?

Salary sacrifice is a government-backed incentive that helps you and your work save on tax.

You 'swap' a small part of your salary for another benefit, such as pension contributions. Instead of you receiving this small amount in your monthly payslip, the amount goes directly into your workplace pension.

As you're reducing your monthly take-home pay you receive right now, it means you owe less tax and overall get to keep more of what you earn overall.

Choose salary sacrifice
A table showing that an employees pay-check is larger after pension contributions are made via salary sacrifice

How does salary sacrifice work?

Here’s an example of Salary sacrifice in action. Rachel works for a small business and earns £50,000 a year.

Before Salary sacrifice:

  • She paid 5% of her earnings into her workplace pension, her employer added a further 3% - a total of £4,000 a year
  • After her pension contributions and tax deductions, her net annual pay was £34,698.10

After Salary sacrifice Rachel keeps more of her earnings:

  • On paper she earns £47,500 a year - she’s 'sacrificed' 5% of her salary that she was previously adding to her pension. This contribution now comes entirely from her employer
  • Her new annual net salary? £35,029.35
  • She’s still adding £4,000 to her pension every year, but by reducing her salary, she’s trimmed her tax bill

As a result Rachel keeps hold of £331.25 extra every year!

Things to keep in mind

While salary sacrifice can be a fantastic way to increase earnings, it will have an impact on anything that is linked to your salary. Here are a few things that may affect your decision to switch to salary sacrifice.


Any salary-linked life insurance or loan applications may be affected. Although, this can typically be explained to the lender with a letter and accounted for.

Low income

You can't use salary sacrifice where it would reduce your earnings to under the minimum wage.

Maternity pay

Typically statutory maternity pay is calculated based on average weekly earnings, so your statutory maternity pay could be reduced if your overall salary is reduced.

Creative woman saving for her future

Opting into salary sacrifice

Simply enter a few details about you and how much you'd like to contribute via salary sacrifice, and we'll sort the res.

If your work doesn't offer salary sacrifice at the moment, we can easily set it up with them for you.

Drop us an email workplacesupport@getpenfold.com here and we'll reach out to your work.

Choose salary sacrifice

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