Salary sacrifice scheme - how does it work, and effect on pension and WTC?

Burnley_Lad

I work for the NHS, and my employer has this week launched a salary sacrifice scheme where you can purchase household goods.

If I was to make a purchase through this scheme, does this mean that I would pay less national insurance and tax each month, as my earnings before tax and national insurance are deducted would be less?

Also, what effect would this have on my pension contributions?

Finally, we are in receipt of working tax credits - would the amount we receive each month reduce or increase as a result of this?

Carl31

You would purchase the goods out of your gross salary, not your net, so the benefit is instead of paying inome tax and NI to the government, they allow you to put it towards your purchase.

Carl31

So, a very basic example would be (ignoring personal allowances for a minute) for every pound you currently earn, you pay 12% (12p) to the government for NI, and 20% (assuming basic rate, 20p) for income tax, also to the government. Instead of this going to the government, they will let you put it towards your purchase


You will essentially pay the same NI and tax, but where it goes to is different, and will be in accordance to your purchase