Salary sacrifice, maternity pay and mortgage applications

A salary sacrifice lowers your contractual pay, and Statutory Maternity Pay (SMP) is based on average weekly earnings from pay that counts for National Insurance. So a sacrifice running in the weeks used to work out your SMP can reduce the first six weeks, which pay 90% of those earnings. The flat-rate weeks that follow are £194.32 for most people and are not touched. A very large sacrifice can also push your average below the £129 a week needed to qualify at all.

How SMP is worked out

For 2026/27 SMP is paid for up to 39 weeks. The first six weeks are 90% of your average weekly earnings. The next 33 weeks are £194.32 a week or 90% of your average weekly earnings, whichever is lower.

Average weekly earnings are worked out from pay in a set period of at least eight weeks. It ends with your last payday before the end of the qualifying week, which is the 15th week before the week the baby is due. What counts is what you were paid in that period, and it includes pay that attracts National Insurance, or would if you earned enough. Overtime, bonuses and arrears are included if they land in the period.

Salary sacrifice reduces your cash pay, so the figure in the period is the smaller one. Maternity leave and pay covers the notice dates and the service you need.

A worked example

Say your contract pays £30,000 and you sacrifice £3,000 a year. Your cash pay is £27,000. The figures below use annual pay divided by 52, which is a simplification of the pay-period method.

	No sacrifice	£3,000 sacrificed
Average weekly earnings	£576.92	£519.23
First 6 weeks (90%)	£519.23 a week	£467.31 a week
Next 33 weeks	£194.32 a week	£194.32 a week

The sacrifice costs £51.92 a week for six weeks, or £311.54 in all. The flat rate applies from week seven in both cases, because 90% of either average is far higher than £194.32. The flat rate only gets replaced by 90% of earnings when your average falls under about £216 a week.

The sacrifice also saved you tax and National Insurance on the £3,000 while you were working. Whether the trade is worth it depends on how long the scheme runs and what it buys. The salary sacrifice guide explains where the tax saving comes from.

The earnings test

You also need average weekly earnings of at least the Lower Earnings Limit, £129 for the 2026/27 tax year. If a sacrifice drops your average below that, you do not qualify for SMP, and your employer must give you form SMP1. The risk is greatest for people on low hours who sacrifice a large share of pay. GOV.UK’s guidance on salary sacrifice also says earnings-related benefits such as Maternity Allowance can be lower, because they rely on NI-able earnings.

A pay rise that takes effect at any time from the start of the set period to the end of your maternity leave leads your employer to recalculate your SMP and pay the difference.

Which scheme you are in

Pension contributions in the NHS, teachers’ and Civil Service schemes come off pay before tax under a net pay arrangement, which does not reduce your National Insurance pay and so does not lower SMP. The arrangements that do cut your contractual pay are salary sacrifice offers, such as cars and cycle-to-work, and some employers use it for pension or childcare too. Salary sacrifice car schemes explains how those leases work during leave.

Salary sacrifice cannot take your cash earnings below the National Minimum Wage. GOV.UK also says your contract must be clear about your cash and non-cash entitlements, and that earnings-related payments can be based on either the reduced or the notional salary, as long as the employee is told which.

If your employer pays more than SMP, as many NHS, school and council employers do, ask whether the pay the scheme refers to is the pre-sacrifice or post-sacrifice salary. NHS maternity pay describes the usual structure.

Mortgage applications

A lender looks at your income, and a sacrifice leaves a lower figure on your payslip and P60. Lenders set their own rules on whether they use that or the pre-sacrifice amount, and GOV.UK’s guidance does not cover mortgages. No official source gives a single answer, so the only reliable one is your own lender’s.

You may also be asked about maternity leave. Lenders can ask how repayments work when you are on SMP or reduced pay. Ask your lender or a mortgage broker before you apply how they treat a sacrifice and statutory pay. If an application is close, ask when and whether your employer allows the sacrifice to be reduced or paused, because the answer may change both the payslip figure and your average earnings for SMP. The take-home pay calculator shows how pay changes with a sacrifice, and maternity pay tax shows how SMP is taxed.