NHS Salary Sacrifice Calculator
How Salary Sacrifice Works
- What it is: You agree to give up part of your gross salary in exchange for a non-cash benefit. Your pay is reduced before tax and NI are calculated.
- Tax & NI savings: Because your gross pay is lower, you pay less National Insurance (13.25% on earnings between £12,570 and £50,270). You may also pay less income tax, depending on whether your Trust payrolls the benefit.
- Lease car schemes: Popular NHS schemes let you sacrifice salary for a brand-new car including insurance, servicing, and breakdown cover.
- Cycle to Work: Sacrifice salary for a bicycle and accessories worth up to £1,000 (or more with some providers), spread over 12 months.
- Childcare vouchers: Existing members can sacrifice up to £243/month (basic rate taxpayers) for childcare costs. Closed to new entrants since October 2018.
- Tech & home electronics: Some Trusts offer salary sacrifice for laptops, phones, and other technology purchases.
Payrolled Benefits in Kind
- What is payrolled BIK? Most NHS Trusts now report salary sacrifice benefits through payroll rather than on a P11D form. This changes how tax is applied to the benefit.
- How it affects income tax: When BIK is payrolled, income tax is calculated on your original (pre-sacrifice) salary. This means you do not save income tax on the sacrificed amount.
- How it affects NI: National Insurance is still calculated on your post-sacrifice salary. You continue to save NI on the sacrificed amount, typically 13.25% within the main NI band.
- How it affects pension: Pension contributions are based on your post-sacrifice salary, which means both your contributions and pensionable pay are reduced.
- Net effect: With payrolled BIK, the main saving from salary sacrifice is on National Insurance contributions. The overall cost reduction is smaller than it would be without payrolling.
- Check with your Trust: Not all schemes or Trusts handle BIK the same way. Always check your payslip or ask your payroll department how your specific sacrifice is processed.
About NHS Salary Sacrifice
Salary sacrifice is a contractual arrangement between you and your NHS Trust where you agree to reduce your gross salary in exchange for a non-cash benefit. The reduction happens before tax and National Insurance are calculated, which is where the potential savings come from.
The most common salary sacrifice schemes in the NHS include lease car arrangements, cycle to work schemes, childcare vouchers (for those already enrolled before October 2018), and technology purchase schemes. The availability of specific schemes varies between NHS Trusts.
It is important to understand that salary sacrifice reduces your pensionable pay. Because your gross salary is lower after the sacrifice, your NHS pension contributions are calculated on a smaller amount, and your eventual pension benefits may be slightly reduced. For large sacrifices such as lease cars (often £300-£600 per month), this reduction can be significant over time.
Salary sacrifice can also affect mortgage applications. Lenders typically look at your gross salary, and some may use your post-sacrifice figure, which could reduce the amount you can borrow. If you are planning to apply for a mortgage, it may be worth checking with your lender how they treat salary sacrifice income.
Student loan repayments are based on your gross pay. Since salary sacrifice reduces your gross pay, your monthly student loan repayments will also be lower. This means it takes longer to repay your student loan but reduces your outgoings each month.