Introduction to this document

Salary sacrifice letter to employee

Where you enter into a salary sacrifice arrangement with an employee it will only be effective for tax and NI purposes where you have notified them of the consequences.

Benefit in kind instead of salary

Since 6 April 2017 most salary sacrifice arrangements cease to offer tax or NI savings. However, some benefits can still be used to save tax and NI. They are:

  • payments into pension schemes
  • employer-provided pensions advice
  • childcare vouchers, workplace nurseries and directly contracted employer-provided childcare
  • bicycles and cycling safety equipment (including cycle to work).

Before entering into an arrangement it is essential that you notify, in writing, the employees affected of the consequences and ideally obtain their acknowledgement of understanding. Our Salary Sacrifice Letter to Employee provides the basic information you should provide.