What is salary exchange?

Salary exchange, also known as salary sacrifice, is an agreement between you and your employer. You give up part of your gross salary, and in return your employer gives you a benefit of the same value.

Because your salary is reduced before Income Tax and National Insurance (NI) are taken, you could pay less of both.

What can you get through salary exchange?

Popular salary exchange benefits include workplace pension contributions, cycle to work schemes, and electric or low-emission company cars. Your employer will tell you which schemes they offer.

Not every benefit gets the same tax saving. For some schemes, the main advantage is spreading the cost of something over time. Your employer can explain how each one works.

👉 Thinking about your pension? Read Why Use Salary Exchange When Making Pension Contributions to see how much you could save.

Is salary exchange right for you?

Here are some things to think about:

• You can’t exchange salary if it would take your pay below the National Minimum Wage or National Living Wage.
• A lower salary could affect other things linked to your pay, like statutory sick pay, maternity pay or how much you can borrow for a mortgage.
• You usually can’t stop or change salary exchange whenever you like, only at set times or after a big life event.
• The rules may change in the future. If you’re not sure whether it’s right for you, speak to a financial adviser.