In 2026, salary sacrifice still delivers full tax savings on pensions, cycle-to-work and ultra-low-emission EVs — the OpRA-exempt benefits. It generally does nothing for health insurance: since the 2017 rules, tax is due on the higher of salary given up or the benefit's value. Health cover is still worth offering — just employer-paid, not sacrificed.
- ✓OpRA rules (2017) killed the tax advantage for most sacrificed benefits, including health insurance.
- ✓Pensions, cycle-to-work and ultra-low-emission EVs kept their full exemption.
- ✓Sacrificing health insurance generally saves nothing — employer-paid cover is the sensible route.
Why the list got short
Salary sacrifice is simple in principle: an employee gives up salary, the employer provides a benefit instead, and both sides save because the benefit is taxed more lightly than pay. Until 2017 that logic applied to a long menu of perks. The Optional Remuneration Arrangement (OpRA) rules changed the arithmetic: for most benefits, tax and NIC are now generally due on the higher of the salary given up or the taxable value of the benefit. If the benefit was cheap to tax before, sacrificing salary for it no longer helps.
Parliament deliberately spared a short list where sacrifice still delivers its full effect — and that list, not the old folklore, is what should drive 2026 benefit design.
The 2026 landscape at a glance
| Benefit | Salary sacrifice in 2026 |
|---|---|
| Pension contributions | Works fully — income tax and NIC saved on sacrificed amounts |
| Cycle-to-work | Works — exempt from the OpRA rules |
| Ultra-low-emission EVs (car schemes) | Works — BIK charged at low ULEV rates, not the salary foregone |
| Employer pension advice, some childcare (legacy) | Works within limits |
| Health insurance / PMI | Generally no saving — taxed on the higher of salary or benefit value |
| Gym, tech, most lifestyle perks | Generally no saving since OpRA |
Why health insurance specifically doesn't work
Employer-paid health insurance is a benefit in kind whether or not salary is sacrificed for it: the employee generally pays income tax on the premium and the employer pays Class 1A NIC at 15%. Under OpRA, sacrificing salary for it means being taxed on the higher of the salary given up or the premium — so at best you break even, and if the employee's sacrifice exceeds the group premium, the sacrifice route can tax them on more than the cover is worth. The full mechanics are in our salary sacrifice and health insurance guide.
The good news: health cover doesn't need the trick. Group premiums (averaging around £57 per employee per month) are typically 10–30% cheaper per head than individual policies, generally corporation-tax deductible, and the BIK cost to a basic-rate employee on an average premium is modest — usually a fraction of what equivalent personal cover would cost them.
Fund health cover the way that works
Common employer mistakes
- Selling PMI as 'tax-free via sacrifice'. It isn't, and hasn't been since 2017. Present it honestly as employer-paid cover with a modest BIK cost.
- Copying pre-2017 scheme designs. Old templates and payroll setups sometimes still sacrifice salary for benefits OpRA now catches — an HMRC problem waiting to be found.
- Forgetting sacrifice lowers contractual pay. Even where it works (pensions, EVs), reduced salary can affect mortgage applications, statutory payments and must not breach minimum wage.
- Missing the reporting. BIK benefits need P11D reporting and Class 1A NIC now, and mandatory payrolling arrives in April 2027 — scheme design should anticipate it.
- Throwing out the benefit with the mechanism. Some firms dropped PMI when the sacrifice saving died. The benefit's value to staff never depended on the tax trick.
What to actually do in 2026
Use sacrifice where it still works hard: pension contributions first, then cycle-to-work and an EV scheme if they fit your workforce. Fund health cover the straightforward way — employer-paid, corporation-tax deductible, BIK reported properly — and compare group quotes rather than assuming your current insurer is competitive. We compare schemes from Bupa, AXA Health, Aviva, Vitality, WPA and The Exeter on one census.
Frequently asked questions
What benefits still work under salary sacrifice in 2026?
The OpRA-exempt short list: pension contributions (the biggest win — income tax and NIC saved), cycle-to-work schemes, and ultra-low-emission electric vehicle schemes, where the low BIK rate rather than the sacrificed salary is taxed. Most other benefits lost their sacrifice advantage in 2017.
Why doesn't salary sacrifice work for health insurance?
Because the OpRA rules tax the employee on the higher of the salary given up or the premium's benefit-in-kind value — so sacrificing salary for PMI saves nothing and can cost more. Employer-paid group cover, with normal BIK treatment and Class 1A NIC at 15%, is the sensible structure.
What are the OpRA rules on salary sacrifice, briefly?
Optional Remuneration Arrangement rules, effective from April 2017: where an employee gives up salary for a benefit, tax is generally charged on the higher of the salary foregone or the benefit's taxable value. Pensions, cycle-to-work and ultra-low-emission cars were exempted and keep their full advantage.
What mistakes do employers make with salary sacrifice schemes?
The common five: still marketing PMI as tax-free via sacrifice, running pre-2017 scheme templates OpRA now catches, letting sacrifice breach minimum wage or affect statutory pay, missing P11D and Class 1A reporting ahead of mandatory payrolling in April 2027, and dropping good benefits just because the tax trick died.
Is employer-paid health insurance still tax-efficient without salary sacrifice?
Generally yes, in the ways that matter: group premiums average ~£57 per employee per month, typically 10–30% below individual pricing, and are normally corporation-tax deductible. The employee's BIK tax on an average premium is usually far less than buying equivalent cover personally. Sacrifice was never the source of that value.