Question 1

Is salary sacrifice better than relief at source?

Accepted Answer

For most UK earners above the National Insurance threshold (£12,570 in 2025/26), salary sacrifice produces a better outcome because it saves both income tax and National Insurance, whereas relief at source only saves income tax. The exact saving depends on your salary band and student loan plan.

Question 2

What is salary sacrifice?

Accepted Answer

Salary sacrifice is an arrangement where you agree to reduce your gross salary by a fixed amount and your employer pays that amount directly into your pension. Because your salary is lower, you pay less income tax and less National Insurance.

Question 3

What is relief at source?

Accepted Answer

Relief at source is the standard pension contribution method where you pay into your pension from already-taxed income. The pension provider then claims back 20% basic rate tax from HMRC and adds it to your pot. Higher and additional rate taxpayers must claim the extra relief themselves through self-assessment.

Question 4

Can salary sacrifice affect my mortgage application?

Accepted Answer

Yes — salary sacrifice reduces your official gross salary, which lenders typically use to calculate how much they will lend you. Some lenders will gross up the sacrificed amount when assessing affordability, but not all. If you are planning to apply for a mortgage soon, ask the lender how they treat salary sacrifice before signing up.

Salary sacrifice or relief at source — which is better?