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HMRC internal manual

Employment Income Manual

Salary sacrifice: contributions to a registered pension scheme: practical considerations

Sections 62 ITEPA 2003 and Section 188 FA 2004

For information on salary sacrifice generally see EIM42750 onwards.

A common form of salary sacrifice is where rights to future cash remuneration are given up in return for the employer paying a sum to a registered pension scheme for the employee’s benefit.

Where pension contributions are involved, the income tax liability of the employee will often not be affected whether or not the salary sacrifice succeeds. If the salary sacrifice does not succeed the pension contributions will be treated as employee contributions. The employee will get full tax relief at his or her top rate of tax on the contribution. This is the same overall income tax liability as if the salary sacrifice had succeeded. For the income tax effects of a salary sacrifice for sums paid to a registered pension scheme see EIM42780.