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Tax Tip: Salary Sacrifice Arrangements.

We asked Stuart Coleman, Manager of the Tax Department of ABDS about Salary sacrifice.

A salary sacrifice happens when an employee gives up the right to part of the cash remuneration due under his or her contract of employment. Usually, the sacrifice is made in return for the employer's agreement to provide the employee with some form of non-cash benefit. The sacrifice is achieved by varying the employee's terms and conditions of employment relating to remuneration.

For example, an employee's current contract provides for cash remuneration of £40,000 a year with no benefits. The employee agrees with the employer that for the future the employee will be paid cash remuneration of £34,800 a year and 52 childcare vouchers a year, each with a face value of £100. This would be referred to as a salary sacrifice.

An employee may also sacrifice a one-off item such as a bonus.

Under this arrangement, the employee saves tax and NIC and the employer saves employer NIC.

A Win Win situation

For those who are looking for a more personal approach on a range of business related issues, contact us at ABDS.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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