NHS Salary Sacrifice Schemes

Complete guide to NHS salary sacrifice schemes and tax-efficient benefits available to healthcare professionals.

Last updated: 2025-07-22

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Available Salary Sacrifice Schemes

Cycle to Work Scheme

Save up to 42% on bikes and cycling equipment

Potential savings: Up to £1,000 annually

Childcare Vouchers

Tax-free childcare support (closed to new applicants)

Potential savings: Up to £933 annually

Electric Car Scheme

Low Benefit-in-Kind rates for electric vehicles

Potential savings: Significant tax savings

Pension Contributions

Additional voluntary contributions via salary sacrifice

Potential savings: Tax and NI relief

NHS Salary Sacrifice Overview

Salary sacrifice schemes allow NHS staff to exchange part of their gross salary for non-cash benefits, reducing tax and National Insurance liabilities:

How Salary Sacrifice Works:

•Reduce gross salary by benefit value

•Pay for benefit from pre-tax income

•Save Income Tax and National Insurance

•Employer also saves National Insurance

Available NHS Schemes:

•Cycle to Work Scheme (bikes and equipment)

•Electric/Ultra-Low Emission Vehicle Scheme

•Additional pension contributions

•Technology schemes (laptops, phones)

•Childcare vouchers (existing members only)

Key Benefits:

•Immediate tax and NI savings

•Spread costs over 12-24 months

•No credit checks required

•Convenient payroll deductions

Source: https://www.nhsemployers.org/pay-pensions-and-reward/reward-and-recognition/salary-sacrifice

Cycle to Work Scheme Details

The NHS Cycle to Work scheme offers significant savings on bicycles and cycling equipment:

Scheme Benefits:

•Save 25-42% on total cost

•Spread payments over 12-18 months

•No credit checks or interest charges

•Includes bikes, accessories, and safety equipment

How It Works:

•Choose bike/equipment up to scheme limit

•Employer purchases on your behalf

•Salary reduced by monthly payments

•Take ownership after hire period

Tax Savings Example:

•Bike cost: £1,000

•Basic rate taxpayer saves: £320

•Higher rate taxpayer saves: £420

•Effective cost: £680 or £580

Eligibility Requirements:

•Continuous NHS employment

•Minimum salary above Living Wage

•Must use bike for commuting

•Agreement to scheme terms

Source: https://www.cyclescheme.co.uk/how-it-works

Electric Vehicle Scheme

NHS electric vehicle salary sacrifice offers substantial savings on low-emission cars:

Benefit-in-Kind Rates 2025/26:

•Electric vehicles (0g/km CO2): 3%

•Plug-in hybrids (1-50g/km): 2-14%

•Conventional cars: 20-37%

Scheme Advantages:

•Fixed monthly cost including insurance

•Maintenance and breakdown cover included

•No deposit or credit checks

•Newer, more efficient vehicles

Tax Calculation Example:

•Electric car P11D value: £30,000

•BIK rate: 3% = £900 annually

•Basic rate tax: £180 per year

•Higher rate tax: £360 per year

What's Included:

•Vehicle lease and insurance

•Maintenance and servicing

•Breakdown and recovery

•Annual MOT and road tax

Source: https://www.gov.uk/government/publications/company-car-and-car-fuel-benefit-tables

Pension Salary Sacrifice

Additional pension contributions through salary sacrifice maximise retirement savings:

How Pension Sacrifice Works:

•Reduce gross salary by contribution amount

•Employer pays equivalent into pension

•Save tax and National Insurance

•Maintain same net contribution cost

Tax Relief Comparison:

•Normal contribution: Relief at marginal rate only

•Salary sacrifice: Tax + NI relief for employee

•Plus: Employer NI savings often shared

Contribution Limits:

•Annual Allowance: £60,000 (2025/26)

•Tapered for high earners (£260,000+ income)

•Carry forward from previous 3 years

•Lifetime Allowance protections available

Example Savings:

•Additional £2,000 pension contribution

•Basic rate: Save £640 (32% total relief)

•Higher rate: Save £840 (42% total relief)

•Actual cost: £1,360 or £1,160

Source: https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension

Important Considerations

Key factors to consider before entering salary sacrifice arrangements:

Impact on Other Benefits:

•Student loan repayments may reduce

•Child Benefit threshold calculations

•Tax Credit and Universal Credit assessments

•Statutory payments (maternity, sick pay)

Pension Implications:

•NHS pension based on pensionable pay

•Salary sacrifice may reduce pensionable pay

•Consider impact on final salary calculations

•AVCs may be more appropriate in some cases

Exit Provisions:

•Usually cannot exit during agreement

•Exceptions for life events (marriage, birth)

•Employment changes may allow exit

•Consider commitment carefully

Financial Planning:

•Ensure adequate take-home pay

•Consider all tax implications

•Review annually for continued benefit

•Seek professional advice if needed

Source: https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye

Consider All Implications

Salary sacrifice affects your gross pay and may impact other benefits including student loan repayments, statutory payments, and benefit calculations. Review your individual circumstances and consider professional advice before proceeding.

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