Boost your Take Home Pay | Salary Sacrifice Explained UK

Salary Sacrifice is a term you may have come across or is a term that you should look out for because it can do wonders for you when you it comes to helping you save for your Pension. In this episode we will be looking at
- What is Salary Sacrifice
- How Salary Sacrifice Works
- The Pros and Cons too
What is Salary Sacrifice?
It basically means giving up part of your salary, which might sound crazy at first but you don't do it because you want less money. you do it as part of an exchange for a non-cash benefit from your employer, such as increasing your pension contributions.
Now the most common salary sacrifice scheme is to do with Pension Contributions however it does vary between employer, and other schemes include company cars, life insurance cover, critical illness cover etc. So do check with your employer for their benefits plan. We will be focusing on Pension Contributions as this is the most common but this video is still helpful even if your thinking of using the scheme for a different benefit.
Also as the name suggests, you need to be earning a salary to be eligible for this. So you do need to be employed as this isn't applicable to those who are self-employed
Chapter Information (Salary Sacrifice Explained)
0:00 Introduction
0:30 What is Salary Sacrifice?
1:31 How does Salary Sacrifice Work?
2:22 Why Salary Sacrifice?
5:33 Salary Sacrifice Workplace Pension Example
10:40 Pros
11:42 Cons
▶Financial Madness: Salary Sacrifice Excel Sheet:
docs.google.com/spreadsheets/...
DISCLAIMER - Any advice or (statements perceived to be advice) given in this video and any other videos on my channel are for information purposes only, and does not act as financial advice. Your are fully responsible for your financial decisions. If you are in need of Financial Advice, please seek out a professional advisor. If your are unsure on how to do this, feel free to reach out to me and I am more than happy to guide you.
#SalarySacrifice #WorkplacePension #SalaryBoost

[@kingsleyajike1753]

Thanks for the video! very clear explanation :)

[@FinancialMadness]

I'm glad it was helpful Kingsley :)

[@traceythomas9804]

Excellent video. Very informative. The chart was a really good way to see comparisons between the two...

[@FinancialMadness]

Thank you. I'm glad to hear that it was helpful:)

[@maxinecourtney4017]

Your video was very helpful and easy to follow. Thank you.

[@FinancialMadness]

Glad it was helpful!. Thank you!

[@swatimalu335]

Very easily explained. Anyone can understand from this.

[@FinancialMadness]

Thank you very much. I am glad you found it helpful

[@officeboyreloaded5427]

Hey dude, love your channel, I think it's worth rerecording or trying to optimize the audio in the video. It's hard to hear without headphones while making dinner if you catch my draft :D. Keep up the good work, have a nice day !

[@FinancialMadness]

Thanks for the tips! My equipment is in serious need of an upgrade. I will definitely take a closer look for my upcoming videos. Cheers

[@fergusproctor2710]

Thank you!

[@FinancialMadness]

You are welcome :)

[@nicobass1966]

Thank you

[@FinancialMadness]

You're welcome. I am glad you found it useful

[@Demetha_Khuba]

Hi, nice video! With regards to salary sacrifice and calculating tax and NI contributions based on the amount left over after taking out the salary sacrifice amount, does that apply only if using salary sacrifice for pensions contributions, or is that the same principle if the salary sacrifice is being used for another type of benefit such as health insurance?

[@Rydia704]

That chair swivel 😂

[@FinancialMadness]

It is an art form!!

[@Rydia704]

@@FinancialMadness You've got it down to a T :D

[@itemushmush]

thank youuuuu

[@FinancialMadness]

Thanks. I am glad you found it helpful

[@vikramsharma4828]

Lovely content thank you. Did struggle with audio though

[@FinancialMadness]

Thank you for the kind comments. Yeah I have been struggling with getting the audio correct in my videos. I believe in my latest videos they have dramatically improved

[@ericmarillier2005]

Thanks for the amazing content. I'm trying to link Salary Sacrifice to you other stream on Higher Income Tax Bracket. If you pay your pension through Salary Sacrifice is there an opportunity to claim the extra tax relief, 20% boost you mentioned?

[@Jjshah90]

Do the reduced NI contributions affect state pension? As in could it mean you might not have made enough contributions once you reach state pension age? Many thanks.

[@mohamedpatel3978]

Good video but doesn't take into account the lower threshold for pension contributions of either £120 per week or £6240 per year. Wouldn't the pension contributions be reduced?

[@daadirabbi]

Thank you for your information but I've a question about this topic I pay every each month Auto Enrol SE ERs And Salary sacrifice where these money goes?

[@TheNinjasDen]

Hi mate, can you please explain how Sal Sac would work for high rate tax payers? Apparently you don't need to bother with HMRC tax forms? Many thanks.

[@bayingjase2006]

How can your examples both show £750 for employer contribution? 3% of £23,750 is £712.50. That is a HUGE reduction in employer contributions thst significantly affects our bottom line. Really helps our employer a ton though!

[@aashishlimaye5037]

I am really struggling to figure if the pension is any good, if I am not sure whether I will be in the UK after 5 years. Would you be able to shed some light on that please?

[@angrymuffinsb]

I feel so thick. I still don’t fully understand. I have a company car. How will that affect it?

[@curiousjoe395]

Great video. With Salary Sacrifice, does your pension provider still fetch the extra 20% from HMRC? I assume not as you never paid any tax on this...

[@FinancialMadness]

No it will not..Your salary by definition is lower and therefore you would automatically pay less Income Tax. So there is no need to fetch the extra 20% relief if you are a higher income earner

[@mrbitss4u]

Thanks, very useful video. I have a questiion and it will be very helpful if you can answer it. Can i sacrifice my salary for higher study? If, yes what is the process and the how the employer can pay the fee to the institute? Thanks in advance.

[@FinancialMadness]

Thank you for the kind comments. Yes it is possible to sacrifice for higher/further education. But it will have to be a benefit your employer provides. I would suggest speaking to your employer to understand the full list of benefits they offer under salary sacrifice, as it can differ

[@mrbitss4u]

@@FinancialMadness Thank you so much. Much appreciated.

[@ChristopherAtkinson-qz2fk]

How does salary sacrifice affect what you receive from Universal Credit?

[@FinancialMadness]

Salary sacrifice can affect the amount of Universal Credit you receive in the UK. Universal Credit is a means-tested benefit that is based on your income and capital. If you participate in a salary sacrifice scheme, your take-home pay will be reduced in exchange for receiving non-cash benefits, such as a company car or a pension contribution. The reduction in your take-home pay will lower your taxable income, but it will also lower the amount of Universal Credit you receive. This is because Universal Credit is calculated based on your net income after tax and National Insurance contributions, which will be lower if you participate in a salary sacrifice scheme.

[@amoh5968]

I don’t think you are explaining correctly. When you’re take home is reduced then you will get more chance of increase in universal credit. I request please double check the facts before your advice financially

[@abbicampbell3433]

I tried to work this out for myself and my take home with the salary sacrifice is less than without. Has this happened to anyone else?

[@FinancialMadness]

Interesting. Fancy sharing your working out with me? I can take a look You can email me at [e-mail]

[@mscampbell7952]

Please can you do a Scottish example 🙏

[@FinancialMadness]

Sure and thanks for the suggestion. I've made a note of it. And will look to create some content on the matter. Watch this space :)

[@gaylevernon6528]

Would love to see this too please.

[@FinancialMadness]

Hi, Thanks for the suggestion. A Scottish Example of Salary Sacrifice will be releasing tomorrow. This link will be available soon for you to watch studio.kzbin.infoCAXzBZM0M5g/edit

[@cx6894]

No clue why anyone would want to do this? You can't guarantee how long you will live, and inflation will eat it away. You can't pull out all the pension all at once. You also can't guarantee you will even get your pension back, what if the government/company goes bust? Better to spend your salary and live your life, or better yet go make more money by making businesses, houses to rent. Convince me otherwise.

[@Chris-yv6xy]

1. Inflation is a risk but if your pension is invested wisely it should hopefully keep up with/outstrip inflation 2. You can pull out all your pension out at once (current age 55) but will result in 75% of it being taxed at relevant rates after personal allowance is used up 3. Most workplace pensions are run by pension providers so if your company goes bust you still have your pension. If the pension provider goes bust I think you should be able to claim from FSCS 4. You can take 25% of your pension tax free from age 55. 5. Very efficient way of saving tax, especially if a higher (40%) or additional rate (45%) tax payer.