A salary sacrifice arrangement is an agreement to reduce an employee’s cash pay entitlement, typically in exchange for a non-cash benefit, such as pension contributions. To ensure your contributions are tax-free, your pension provider must be registered for tax relief with HMRC and accept gross employer contributions, including ad-hoc payments rather than only fixed payments via direct debit.
We work with a wide range of pension providers and will confirm during registration whether we can facilitate salary sacrifice contributions to your chosen provider.
As of April 2025, the annual pension allowance remains at £60,000 for individuals with an adjusted income of £260,000 or below. For every £2 your adjusted income exceeds £260,000, your annual allowance is reduced by £1. The minimum allowance this can taper down to is £10,000. Adjusted income includes all forms of taxable income such as salary, bonuses, commissions, dividends, rental income, and savings interest.
Salary sacrifice contributions made through Umbrella.co.uk are processed by us as your employer. However, please note that no additional employer or end-client contributions are made — your pension contribution comes solely from the assignment rate agreed for your salary.
If your total pension contributions exceed the annual allowance, the excess amount may be subject to a tax charge. It is your responsibility to account for all pension contributions across all sources, not just those made via Umbrella.co.uk.
You may be able to carry forward any unused annual allowance from the previous three tax years. If you plan to do this, we will require written confirmation from your Independent Financial Advisor (IFA) stating the amount of carry-forward allowance available before we can process the salary sacrifice. Umbrella.co.uk strongly recommends consulting a financial advisor to confirm your allowance and determine the most suitable contribution approach for your circumstances.
When registering with us, you’ll be asked to provide the details of your pension provider and confirm the percentage of your salary you’d like to sacrifice. We’re legally required to pay at least the National Minimum Wage and provide statutory holiday pay, so these will be taken into account when determining your salary sacrifice amount.
Because your working hours or days may vary during your assignment, we calculate contributions based on a percentage of your income after ensuring National Minimum Wage requirements are met. It’s important to consider how this could impact any loan or mortgage applications in the future, as salary sacrifice arrangements can affect your reported gross pay.
Once everything is confirmed, we’ll deduct your contributions from your payroll on a weekly or monthly basis, depending on your pay frequency. These contributions are then paid to your pension provider in the second week of each month.
If you later decide to stop sacrificing a portion of your salary for pension contributions, your gross pay will increase accordingly. However, please note that once contributions are stopped, they cannot be reinstated until you begin a new contract.
You may also be eligible to claim expenses through your umbrella arrangement. This can be discussed during registration and is quick and straightforward to set up if applicable.
If you’d like to get in touch with us, we’re available by telephone (Mon–Thurs: 09:00–17:30, Fri: 08:30–17:30), email, or live chat. We recommend using our live chat feature for the fastest and most convenient support — you can speak with our team while continuing with your day-to-day tasks.
You’ll also find a wide range of helpful guidance and frequently asked questions in the Help section of our website, accessible from the top menu.
