Salary sacrifice for benefits: the OpRA rules in 2026/27
Updated 12 November 2026 · Tax year 2026/27
Scope: benefits in kind provided through salary sacrifice or instead of a cash alternative, 2026/27. For pension salary sacrifice see salary sacrifice versus net pay. Part of the benefits in kind guide.
Salary sacrifice means agreeing with your employer to give up part of your salary in return for a non-cash benefit. For pensions it is a well-known way to save tax and National Insurance. For most other perks, it no longer saves much. Since 6 April 2017, benefits provided through salary sacrifice, or chosen instead of a cash alternative, fall under the optional remuneration arrangement (OpRA) rules. In most cases you are taxed on the salary you gave up, and the usual tax exemptions do not apply.
This guide explains how the OpRA rules work in 2026/27, which benefits are excepted, and what salary sacrifice actually saves on an electric car, a petrol car, a bike, a gym membership and a phone. Figures use the income tax and National Insurance logic in the js/tax.js engine behind the Take-Home Lab calculator. It is general information, not tax advice.
What counts as an optional remuneration arrangement
A benefit is provided through an OpRA if you either:
- give up the right to salary in return for it (salary sacrifice), or
- choose it instead of cash you could have had, for example taking a company car rather than a car allowance.
Flexible benefits schemes, where you spend part of your package on perks such as health cover, dental insurance or extra holiday, usually count too. A salary sacrifice must also not reduce your cash pay below the National Minimum Wage or National Living Wage.
How the benefit is valued
Under the OpRA rules, the taxable value is the higher of:
- the salary or cash you gave up, and
- the value of the benefit under the normal benefit in kind rules.
When making the comparison, anything you pay towards the benefit is ignored; it is then deducted from the result if paid by 6 July after the tax year ends. If the benefit would normally be exempt, such as a mobile phone, its normal value is treated as nil, so you are taxed on the full salary given up.
The benefit is still not subject to employee National Insurance (your employer pays 15% Class 1A instead). That is why some salary sacrifice schemes still save you a little: your salary, which attracts 8% or 2% employee NI, is swapped for a benefit that does not.
Benefits excepted from the OpRA rules
These benefits keep their normal tax treatment even when provided through salary sacrifice:
- payments into registered pension schemes
- employer-provided pensions advice
- workplace nurseries
- childcare vouchers and directly contracted childcare that started on or before 4 October 2018
- bicycles and cycling safety equipment, including cycle to work schemes
- cars with CO2 emissions of no more than 75 g/km, which are always valued under the normal company car rules
The transitional protection for arrangements made before 6 April 2017 has ended for all benefits; the last protected cars, accommodation and school fees fell under the rules by 6 April 2021 at the latest.
Example 1: an electric car through salary sacrifice
Assumptions: 2026/27 · England, Wales or Northern Ireland · £40,000 electric car (4%, £1,600 benefit) · £6,000 a year of salary given up (an illustrative lease cost) · no pension or student loan.
An electric car is under 75 g/km, so it is taxed on the normal £1,600 benefit, not on the £6,000 given up.
| Salary | Take-home falls by | Tax on £1,600 benefit | Net cost of the car | Saving on £6,000 |
|---|---|---|---|---|
| £35,000 | £4,320.00 | £320.00 | £4,640.00 | £1,360.00 |
| £60,000 | £3,480.00 | £640.00 | £4,120.00 | £1,880.00 |
Scroll sideways to see the whole table →
The saving comes from paying the £6,000 out of gross pay instead of taxed pay, less the tax on the low 4% benefit. This is why electric car salary sacrifice schemes are popular. A lower salary can affect other things, such as mortgage applications, some statutory payments and pension contributions based on salary, so check the scheme terms.
Example 2: a petrol car through salary sacrifice
Now a £30,000 petrol car at 120 g/km (30%, a £9,000 benefit) for the same £6,000 of salary. The car is above 75 g/km, so the OpRA rules apply: the taxable value is the higher of £6,000 and £9,000, which is £9,000.
- On £35,000, take-home falls by £4,320.00 and the tax on the £9,000 benefit is £1,800.00: a total cost of £6,120.00, more than the £6,000 given up.
- On £60,000, take-home falls by £3,480.00 and the tax on the benefit is £3,600.00: a total of £7,080.00.
For high-emission cars, salary sacrifice can cost more than it saves. The same comparison applies when you choose a car instead of a car allowance: if you are offered a £4,000 allowance and choose a car with a £9,000 benefit, you are taxed on £9,000; choose an electric car worth £1,600 and you are taxed on £1,600 (£320 at 20%, £640 at 40%), not on the £4,000 you gave up.
Example 3: cycle to work
Bikes and safety equipment are excepted from the OpRA rules and are normally exempt, so a cycle to work scheme saves income tax and National Insurance on the amount sacrificed. Giving up £1,000 of salary for a bike and equipment costs £720.00 of take-home on £35,000 (a saving of £280.00) and £580.00 on £60,000 (a saving of £420.00). If the bike is later transferred to you for less than its market value, the difference can be taxable, so check how your scheme handles ownership at the end.
Example 4: gym membership or a phone
A gym membership costing your employer £500, provided for £500 of salary, is taxed on £500. On £35,000 your take-home falls by £360.00 and you pay £100.00 of tax on the benefit: a net cost of £460.00, saving only the £40 of employee National Insurance. On £60,000 the net cost is £490.00, a saving of £10.
A mobile phone is normally exempt, but not through salary sacrifice. Giving up £360 a year for a phone contract costs £331.20 on £35,000 (£259.20 less take-home plus £72.00 of tax) and £352.80 on £60,000. The same pattern applies to health insurance and other perks: see private medical insurance.
What salary sacrifice still does well
- Pensions: the biggest exception. See salary sacrifice versus net pay, including planned changes to National Insurance on pension salary sacrifice from April 2029.
- Electric and ultra-low-emission cars up to 75 g/km.
- Cycle to work.
- Childcare for those still in schemes that started on or before 4 October 2018, and workplace nurseries.
Salary sacrifice also lowers the pay that student loan repayments are worked out on, because it reduces your cash salary.
How it is reported
Your employer reports the OpRA value, the higher amount, on form P11D or through payroll, and pays Class 1A National Insurance on it. Excepted benefits such as pensions and cycle to work do not need to be reported. If a benefit is valued at the salary given up, that higher figure is what appears in your tax code. Car and van benefits come under mandatory payrolling from 6 April 2027.
What the calculator shows
The take-home calculator models salary sacrifice for pensions only and does not include benefits in kind. To model another salary sacrifice, enter your reduced salary and then subtract the tax on the benefit (its OpRA value multiplied by your marginal rate). Do not add the benefit to your salary, because that would also charge National Insurance and student loan on it.
Frequently asked questions
What is an optional remuneration arrangement?
It is any arrangement where you give up salary for a benefit, or choose a benefit instead of cash you could have had. Since 6 April 2017 such benefits are usually taxed on the higher of the cash given up and their normal value.
Does salary sacrifice for an electric car still save tax?
Yes. Cars with CO2 emissions of 75 g/km or less are taxed on the normal benefit in kind value, which is 4% of the list price for an electric car in 2026/27, not on the salary given up.
Is cycle to work still tax-free through salary sacrifice?
Yes. Bicycles and cycling safety equipment are excepted from the OpRA rules, so giving up £1,000 of salary saves £280 at basic rate and £420 at higher rate.
Why does salary sacrifice for a gym or phone save so little?
These benefits are taxed on the salary you give up, so the only saving is the employee National Insurance on that salary: 8% at basic rate or 2% above £50,270.
Which benefits keep their tax advantages through salary sacrifice?
Pension contributions, pensions advice, workplace nurseries, childcare arrangements started on or before 4 October 2018, cycle to work, and cars up to 75 g/km.
Check your salary in the calculator
Sources (checked 12 November 2026): HMRC 480 appendix 12: optional remuneration arrangements; HMRC salary sacrifice for employers (excepted benefits, 75 g/km cars, National Minimum Wage); HMRC appropriate percentages 2026 to 2027; HMRC 480 chapter 5 (cycle to work, mobile phones); HMRC rates and thresholds for employers 2026 to 2027. Figures from the Take-Home Lab calculator engine for 2026/27. Illustrative only — not tax advice. Rodway Labs · hello@takehomelab.co.uk.