Guide

Salary Sacrifice on a Bonus 2026/27

Published by the UK Money Calculators editorial team. Last updated for the 2026/27 tax year.

You can sacrifice a bonus into a pension — but only if the sacrifice is agreed before the bonus is contractually due. Once a bonus has been paid or is legally owed to you, it cannot be redirected to a pension retrospectively. Timing is everything, and getting it wrong means the full bonus is taxed as employment income.

The core rule: sacrifice before entitlement

HMRC's position is clear. A salary sacrifice arrangement is only effective if you give up a future entitlement to cash. If you already have a contractual right to receive the bonus and then choose to divert it into your pension, HMRC treats the bonus as income you have received and chosen to re-direct — not as a sacrifice. The full bonus is taxable in that case, regardless of where the money ends up.

The key legal concept is the "contractual right to waive." You must enter the sacrifice arrangement before the point at which the bonus becomes a debt owed to you by your employer.

In practice, this means the sacrifice election must be made before the bonus date — typically before the end of the bonus reference period or before the board or management sign off the award, depending on your employer's scheme rules.

How the pre-bonus sacrifice window works

Many employers who offer bonus sacrifice run a formal election window — a short period before the bonus date during which employees can nominate what percentage (or fixed amount) of their bonus they wish to sacrifice into their pension.

The election window typically opens several weeks before the bonus payment date.
You nominate a percentage (e.g. 50%) or a fixed amount of the expected bonus.
The employer amends the contract for that payment — reducing the contractual cash bonus and increasing the pension contribution by the sacrificed amount.
If you miss the window, the sacrifice cannot be made for that bonus.

If your employer does not currently offer a bonus sacrifice window, you can ask HR or payroll to set one up — many payroll systems support it, and the employer also benefits from the NI saving.

Tax saving from bonus sacrifice

A bonus is employment income, taxed at your marginal rate:

Basic rate: 20% income tax + 8% employee NI = 28% total deduction (on earnings below £50,270)
Higher rate: 40% income tax + 2% employee NI = 42% total deduction (on earnings above £50,270)
Additional rate: 45% income tax + 2% employee NI = 47% total deduction (above £125,140)

By sacrificing the bonus before it is due, none of these deductions apply to the sacrificed portion. The full amount lands in your pension. Your employer also saves 15% employer NI on the sacrificed amount — some will pass this on as an additional pension contribution.

For higher-rate taxpayers, the effective saving compared to taking the cash is typically over 42p in the pound — a significant difference, especially for large bonuses.

Worked example: £10,000 bonus, higher-rate taxpayer

Without sacrifice

Gross bonus: £10,000
Income tax at 40%: £4,000
Employee NI at 2%: £200
Net take-home from bonus: £5,800

With full sacrifice (arranged before bonus date)

Gross bonus sacrificed to pension: £10,000
Income tax: £0
Employee NI: £0
Amount into pension: £10,000
Additional employer NI saving (15% × £10,000): £1,500 — your employer may add this too

The pension is £4,200 better off compared to taking the cash. Whether this is the right choice depends on your pension annual allowance, cash needs and retirement plans.

Annual allowance check

Bonus sacrifice increases your total pension input for the year. Ensure the sacrificed bonus, combined with all other employer and employee pension contributions, does not exceed your annual allowance — £60,000 for 2026/27 (or lower if you have a tapered or money purchase annual allowance). Exceeding the annual allowance triggers a tax charge that can offset the sacrifice saving.

If you have unused allowance from the previous three tax years, carry-forward rules may allow you to exceed the standard limit. A pension adviser can help you model this.

Try the calculator

Use our free salary sacrifice calculator to estimate the tax and NI saving from sacrificing part of your bonus or regular salary into a pension.

Open the calculator →

Frequently asked questions

Can I sacrifice my bonus into a pension?

Yes, but only if you arrange the sacrifice before the bonus is contractually due. Once the bonus is legally owed to you, it cannot be sacrificed retrospectively. You need to make the election during your employer's pre-bonus sacrifice window, before the award is formally made.

When must I agree to sacrifice a bonus?

You must agree before the point at which the bonus becomes a contractual entitlement — typically before the bonus reference period ends or before the formal award date. Your employer's scheme will specify a deadline. Missing the deadline means the sacrifice cannot be made for that bonus cycle.

What happens if I agree to sacrifice a bonus too late?

If you have already acquired a contractual right to the bonus cash, any attempt to divert it to a pension will not constitute a valid salary sacrifice. HMRC will treat the full bonus as taxable employment income, and any pension payment will be treated as a personal contribution — attracting tax relief via your pension scheme rather than NI relief via salary sacrifice.

Does my employer save NI on my bonus sacrifice too?

Yes. The employer's NI saving is 15% of the sacrificed bonus amount. On a £10,000 bonus sacrifice, the employer saves £1,500. Some employers pass this saving back as an additional employer pension contribution — check your scheme rules.

Does sacrificing my bonus affect my annual allowance?

Yes. Bonus sacrifice is added to your total pension input for the year and counts toward the annual allowance (£60,000 for 2026/27). If total contributions — including employer contributions and the sacrifice — would exceed your annual allowance, a tax charge applies. Consider using carry-forward if you have unused allowance from prior years.

Official sources

This guide is for general information only. It does not constitute financial, tax or legal advice. Tax rates and rules can change. Always check current GOV.UK guidance and consult a qualified adviser before making decisions.