NHS salary sacrifice schemes
NHS Trusts offer a range of salary sacrifice schemes, from Cycle to Work to car leasing to additional pension contributions. Each one lets you give up part of your contractual salary in exchange for a benefit, saving income tax and (for most schemes) National Insurance on the value of the benefit.
Common NHS salary sacrifice schemes
| Scheme | What it covers | Typical saving |
|---|---|---|
| Cycle to Work | Lease a bike and accessories up to a set limit (commonly £1,000 to £3,000) through salary sacrifice over 12 or 18 months. Saves tax and NI on the lease payment. End-of-term ownership is usually offered for a small final fee. | 32% to 47% of the lease cost depending on tax band |
| NHS Car Lease | Lease a new car (often hybrid or electric) through your Trust's approved scheme via salary sacrifice. Includes insurance, servicing, breakdown cover and road tax in the monthly cost. Particularly tax-efficient for electric vehicles because of the low Benefit in Kind charge. | Variable; significant on electric vehicles due to low BiK |
| Workplace Nursery | Pay for an Ofsted-registered workplace nursery place through salary sacrifice. Available where the Trust has a partnership with a registered nursery. Saves tax and NI on the cost; survives the closure of the older childcare voucher scheme to new entrants. | 32% to 47% of nursery fees |
| Home Electronics | Some Trusts offer a salary sacrifice scheme for laptops, mobile phones and other home electronics. Less common than cycle and car schemes, and saves tax but not always NI depending on how the scheme is set up. | 20% to 40% depending on scheme structure |
| Additional Voluntary Contributions | Pay extra into the NHS Pension Scheme or a separate Additional Voluntary Contribution (AVC) scheme on top of the standard contribution. Reduces gross pay and so reduces both income tax and your student loan repayment (if applicable). Builds extra pension for retirement. | Full marginal income tax relief |
Availability varies by Trust. Your local HR or Reward team can confirm which schemes are offered and on what terms.
How salary sacrifice works
You sign an agreement with your employing Trust that reduces your contractual salary by a set amount in exchange for the benefit. The reduction is normally for a fixed term (12, 18, 24 or 48 months depending on the scheme). Because the sacrificed amount never counts as taxable salary, you save income tax at your marginal rate (20%, 40% or 45%) and National Insurance (8% or 2% above the upper earnings limit) on the value of the benefit.
Salary sacrifice is HMRC-approved when it is operated through a properly structured scheme that meets the conditions in Salary Sacrifice for Employee Benefits guidance. NHS Trusts run these schemes through approved providers (Cyclescheme, Tusker, NHS Fleet Solutions and others), which handle the administration and stay within the rules.
What it does to your payslip
Salary sacrifice reduces your gross pay (the 'Basic Salary' or 'Standard Pay' line on your payslip) by the sacrificed amount. The reduction usually shows alongside the benefit cost, so a £100 Cycle to Work sacrifice produces a £100 reduction in gross pay and a separate £100 benefit allocation. Tax and NI are calculated on the reduced gross figure.
Because gross pay is lower, salary sacrifice also reduces student loan repayments, child benefit means-test thresholds, and the income figure used for affordability checks on mortgages and other lending. For most schemes the tax saving is much larger than these knock-on effects, but the calculation is worth running before committing.
Pension contributions under salary sacrifice
NHS Pension Scheme contributions are calculated on pensionable pay, which is defined separately from contractual salary. For most salary sacrifice schemes, pensionable pay is unaffected, so your pension contribution and accrual continue at the same level as before. This is the most generous treatment and is the position for cycle, nursery and most car lease schemes.
Additional Voluntary Contributions are different: extra payments into a pension are themselves pension contributions, so they reduce gross pay but also build your pension. AVCs are particularly tax-efficient for higher-rate taxpayers who want to top up their retirement savings beyond the standard 1/54th accrual rate of the main scheme.
Things to consider before signing up
Salary sacrifice is contractual: you cannot drop out mid-term without a permitted 'lifestyle event' (redundancy, long-term sickness, maternity, divorce, significant personal change). For long-term commitments like a 48-month car lease, that matters. Think about whether you could lose your job, take a career break or move house during the term, and whether the scheme allows transfer or early exit.
Salary sacrifice can also affect Statutory Maternity Pay, Statutory Sick Pay and mortgage affordability calculations because they are based on gross pay. The maternity effect is the most significant: SMP is calculated on average earnings in the qualifying weeks, so a sacrifice running through those weeks reduces maternity pay. Most Trusts let you suspend the sacrifice for the maternity period if you ask.
Common questions
- What is salary sacrifice?
- An arrangement where you give up part of your contractual salary in exchange for a non-cash benefit, like a bike, car lease or extra pension contributions. Because the sacrificed amount never counts as taxable salary, you save income tax and (for most schemes) National Insurance on the value of the benefit. Salary sacrifice is HMRC-approved and widely used across NHS Trusts.
- Does salary sacrifice affect my NHS pension?
- It depends on the scheme. Pension contributions in the NHS Pension Scheme are calculated on your pensionable pay before salary sacrifice for some benefits (so your pension is not reduced) but on your post-sacrifice pay for others. Your Trust's payroll team can confirm the treatment for each scheme they offer. For most non-pension salary sacrifice schemes the effect on NHS Pension benefits is small and worth the tax saving on the benefit.
- Will salary sacrifice affect my mortgage application?
- Possibly. Lenders normally use your gross salary for affordability calculations. If you have an active salary sacrifice arrangement, your gross salary on the payslip is the reduced figure, which can reduce the amount you can borrow. Most lenders will accept your pre-sacrifice salary if you provide evidence of the arrangement, but some are stricter. It is worth checking with your lender or broker before entering a salary sacrifice scheme if you are mid-application.
- Can I leave a salary sacrifice scheme early?
- Usually not without a good reason. The schemes are contractually committed and typically run for 12 to 48 months depending on the type. Permitted 'lifestyle events' that allow early exit include redundancy, long-term sickness, maternity leave, divorce or a significant change in personal circumstances. Otherwise you continue paying the sacrifice for the agreed term even if you change your mind.
- Does salary sacrifice affect maternity pay?
- Yes, in the short term. Statutory Maternity Pay (SMP) and NHS Occupational Maternity Pay are calculated on your average weekly earnings in the 'qualifying weeks' before maternity leave, typically about three months before due date. If you have a salary sacrifice arrangement during those weeks, your average earnings are reduced and so is your maternity pay. Many Trusts let you suspend the sacrifice for the maternity period; check your local scheme rules.
- Are NHS car lease schemes worth it?
- For most staff, yes, particularly if you want an electric vehicle. The Benefit in Kind tax on fully electric company cars is just 2% to 3% for most current models, which makes the effective monthly cost much lower than buying or leasing privately. The total cost includes the car, insurance, servicing, breakdown cover and road tax in one monthly figure. Petrol and diesel cars have much higher BiK rates and are usually less tax-efficient than buying privately. The numbers depend on your personal tax rate and the specific vehicle.
- Can I use cycle to work for a high-value electric bike?
- Yes, in principle. The £1,000 historical limit on Cycle to Work schemes was removed in 2019, and most NHS schemes now allow bikes up to £3,000 or higher. Electric bikes are eligible alongside conventional bikes. The tax saving is the same proportion (32% to 47%) regardless of bike value, so a £3,000 e-bike saves £960 to £1,410 in tax and NI over the lease period.