Can you use salary sacrifice with umbrella companies?

Can you use salary sacrifice with umbrella companies?

Salary sacrifice isn’t for everyone. However, it can be an excellent way for employees to boost their earnings in a tax-efficient manner. This article sets out to answer the most common questions on salary sacrifice with umbrella companies. Keep reading to find out more.

Do umbrella companies offer salary sacrifice?

Most umbrella companies don’t offer salary sacrifice because it’s our understanding it can be heavy with associated administration. However, shop around, and you’ll find one or two accredited umbrella companies that can help you. Therefore, if you’re keen to take advantage of salary sacrifice with an umbrella company – you can find a suitable payroll provider if you’re prepared to persevere.

Types of salary sacrifice

If you’re interested in salary sacrifice with an umbrella company, you’re probably looking for ways to reduce your tax and National Insurance Contributions (NIC) in exchange for non-cash benefits. The most common salary sacrifice arrangements are payments into pensions, nurseries, childcare vouchers, and the cycle to work scheme. However, if you’re using an umbrella, the most common salary sacrifice arrangement that employees want is related to pensions.

Salary sacrifice for pension contributions

If you’re an umbrella employee, you may be interested in receiving less of your salary in exchange for making higher pension contributions. Not only is this a great way to save for retirement, but your pension contributions will be exempt from tax and NICs – making salary sacrifice a great way to save.

How much extra you decide to contribute each payment frequency is up to you. Usually, employees will choose a fixed amount (e.g. £500 per month), or a percentage of their income (e.g. 30%).

Who could benefit from salary sacrifice for pension contributions?

Salary sacrifice for pensions is the most popular method of salary sacrifice, but it’s not suited to everyone. Generally speaking, it may be ideal for those who meet one of the following criteria:

  • Growing your pension pot is a priority
  • You’re a high earner
  • You have multiple sources of income
  • You’re happy to see your weekly/monthly income decrease as you’ll be contributing more towards your pension
  • You are planning on retiring in the near future

Personal pensions

To take advantage of salary sacrifice with an umbrella company, you’ll need to have a personal pension set up. If you have one already – great. However, if you don’t – no need to worry. There are plenty of personal pension providers out there, some more suitable than others. It’s a good idea to contact your umbrella company and see if they can make recommendations. Some umbrella companies are partnered with pension providers, and some can offer specialist wealth management advice through an affiliated organisation. Either way – don’t make the difficult decision by yourself. Seek assistance and see what’s out there.

Conclusion

Can you use salary sacrifice with umbrella companies? Yes – you can. However, you may need to set some time aside to hunt for the best provider, as not many umbrella companies can accommodate employees looking to benefit with salary sacrifice.

Remember, we strongly recommend you only consider using umbrella companies that are accredited by either the Freelancer and Contractor Services Association (FCSA) or Professional Passport. Compliance is critical!

Top 10 umbrella companies

If you’re looking for an umbrella company you can trust – you’ve come to the right place. We have collated a top 10 umbrella companies list, and they’re all compliant. Some even offer salary sacrifice! Please check them out now.

The Complete Umbrella Company Guide - Download Now

Click here to see our top 10 umbrella companies!

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