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An agreement to give up part of your salary in exchange for a non-cash benefit, saving tax and NI.
Salary sacrifice is a formal change to your employment contract where you agree to receive a lower cash salary in exchange for a benefit (typically pension contributions, a cycle-to-work scheme, or an ultra-low emission car). By reducing your gross pay, you pay less Income Tax and National Insurance, and your employer also saves on NI. It is one of the most tax-efficient ways to receive benefits in the UK.
This definition is for informational purposes only and does not constitute tax, legal, or financial advice. Rules may change and outcomes depend on your circumstances.
These GOV.UK and HMRC sources provide the official context for this glossary entry. The definition is educational and does not determine your individual tax position.