Take the bonus as cash or sacrifice it into a pension?
Taking a bonus as cash gives you money now. Where an employer allows genuine bonus salary sacrifice, exchanging some or all of it for an employer pension contribution can reduce the cash earnings exposed to Income Tax and employee National Insurance, and can also affect adjusted net income and payroll student-loan deductions.
| Take bonus as cash | Eligible bonus sacrifice to pension | |
|---|---|---|
| Cash now | Yes, after deductions | No — amount goes to pension |
| Income Tax | Bonus is taxable earnings | Genuine sacrificed salary is not received as taxable cash salary |
| Employee NI | Normally applies | Normally reduced with the sacrificed cash earnings |
| Adjusted net income | Can increase it | Can keep contractual taxable salary lower |
| Student loan payroll earnings | Can increase deductions | Genuine sacrifice can reduce relevant payroll earnings |
Why this becomes especially important near £100,000
A cash bonus can push adjusted net income over £100,000, where the Personal Allowance starts to taper away. If your employer offers a qualifying salary-sacrifice arrangement and the timing/rules allow the bonus to be sacrificed before you become entitled to the cash, pension sacrifice can keep that amount out of contractual cash pay.
Do not sacrifice a bonus after the fact
Salary sacrifice is a contractual change, not a retrospective tax election. The arrangement needs to be valid and implemented by the employer. If you have already become unconditionally entitled to a cash bonus, simply asking for it to be redirected may not produce the same tax treatment.
Employer scheme rules matter. Check deadlines, pension annual allowance implications, minimum-wage restrictions and whether your employer shares any employer-NI saving. This page explains the tax mechanics; it is not personal financial advice.
2026/27 versus the announced 2029 change
For 2026/27, the current salary-sacrifice pension rules apply. The announced restriction on the NIC advantage of pension salary sacrifice is scheduled for April 2029, not this tax year.
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FAQs
Can I salary sacrifice my bonus into a pension?
Some employers allow this, but it must be a valid salary-sacrifice arrangement under the employer scheme and normally needs to be agreed before entitlement to the cash bonus arises.
Why can bonus sacrifice be useful above £100,000?
A cash bonus can increase adjusted net income and trigger Personal Allowance tapering. Genuine salary sacrifice can keep contractual taxable cash salary lower.
Is the pension salary-sacrifice NI cap already in force?
No. The announced restriction is scheduled from April 2029, so it does not apply to 2026/27 calculations.