Open Enrolment Benefits UK: How to Choose the Right Options

Introduction

Open enrolment can feel intimidating, especially when your employer offers a long list of optional benefits. The choices you make — and how they interact with tax and National Insurance — can have a real impact on your day-to-day wellbeing and your net take-home pay. If you are unsure how to prioritise benefits or how the tax rules work in practice, you are not alone.

This guide walks through the UK-specific rules, tax implications, and practical issues around common open-enrolment options for the 2025/26 tax year. Whether you earn £22,000 or £120,000, the aim is to help you compare benefits, avoid unpleasant surprises, and make confident, evidence-based decisions.

Tax rules and government programmes change over time. This guide reflects rules announced and in force as of the latest update prior to the 2025/26 tax year. Always check current GOV.UK guidance or speak to a qualified adviser before making decisions that materially affect your finances.

How Open Enrolment Typically Works in the UK

In the UK there is no single, nationally defined "open enrolment season" as there is in some other countries. Instead, most employers set their own annual window during which you can review and change many of your workplace benefits for the year ahead. The dates vary: some schemes align with the calendar year, others with the tax year, and others with insurance renewal cycles.

Outside that window, most flexible benefits and salary sacrifice choices are locked in until the next open-enrolment period. Changes are usually only allowed if you have a recognised life event (such as marriage, divorce, birth or adoption of a child, or certain changes in working hours); even then the rules depend on your employer’s policy and scheme documents.

Main benefits decided during open enrolment

• Salary sacrifice choices (electric vehicles, Cycle to Work, pension enhancements, workplace nurseries)
• PMI and dental
• Give As You Earn (GAYE) / payroll giving
• Holiday accrual schemes (buy extra paid time off)
• Life upgrades and Income Protection upgrades

Why the Salary Sacrifice Decision is So Crucial

• The amount of income tax and National Insurance you pay — and the period over which you pay them — can change.
• Some elections cannot be reversed until the next scheme year unless you have a qualifying life event.
• Monthly cash flow and long-term financial resilience are both affected.
• Your contractual salary after sacrifice can influence things like mortgage affordability assessments and the calculation of certain statutory payments (for example, Statutory Maternity Pay or redundancy pay).

Understanding Salary Sacrifice and Net Pay

Salary sacrifice underpins many workplace benefits in the UK, but the tax rules are not uniform and are often misunderstood.

How salary sacrifice works

You agree with your employer to give up part of your contractual gross salary in exchange for a non-cash benefit of equal value. Because the reduction happens before income tax and employee NI are calculated, the sacrificed amount is usually not subject to income tax or employee NI — but only for certain benefits still treated favourably under the Optional Remuneration Arrangements (OpRA) rules.

Two key constraints apply:

• Your cash pay after sacrifice cannot fall below the National Minimum/Living Wage.
• Salary reductions under a binding sacrifice agreement generally reduce the pay used to calculate certain statutory payments and benefits (e.g., Statutory Maternity Pay, Statutory Sick Pay, redundancy pay, and sometimes entitlement to or amounts of state benefits).

Where tax/NI savings can still apply under OpRA (2025/26 rules)

Under current HMRC Optional Remuneration Arrangements (OpRA) rules, some categories of benefit remain outside the harsher treatment and can still provide genuine income-tax and NI savings when offered via salary sacrifice. Common examples include:

• EV and ULEV salary sacrifice schemes (qualifying ultra-low-emission company cars, including many EVs)
• Pension contributions (employer pension via salary sacrifice)
• Cycle to Work schemes (qualifying bikes and safety equipment)
• Workplace nursery schemes and some qualifying childcare arrangements
• Additional annual leave, where offered under compliant salary sacrifice arrangements

The exact classification depends on how the employer and the provider have structured the scheme, but these categories are often where salary sacrifice can still "work".

Where salary sacrifice usually does not save income tax

For many other benefits caught by OpRA, HMRC broadly compares:

1. The amount of salary given up
2. The taxable value of the benefit

Whichever is higher is subject to income tax. That largely removes the income-tax advantage of using salary sacrifice for those items (though there can still be employer NI effects).

Common examples where no income-tax saving is usually available via salary sacrifice include:

• Private medical insurance (PMI) and most stand-alone dental schemes
• Life assurance or income-protection cover above the employer’s core level
• Taking cash allowances or converting non-cash benefits back into cash

Quick example: EV vs PMI (tax year 2025/26)

Consider a basic-rate taxpayer sacrificing £500 a month (£6,000 a year) for an electric company car via salary sacrifice:

• At a combined 20% income tax and 8% employee NI, the sacrifice reduces tax and NI by roughly £1,680 a year (about £140 a month), ignoring threshold effects.
• The car is still a Benefit-in-Kind (BiK): in 2025/26, a fully electric company car is scheduled to be taxed at 3% of its list price. On a £40,000 list price, the taxable BiK value is £1,200 a year; at 20% tax, this is about £240 of extra tax a year (around £20 a month).

Overall, in this simplified example, the worker is better off by around £100–£120 a month after tax compared with taking the £500 as taxable salary, plus they get the bundled car costs (lease, servicing, roadside assistance, etc.).

By contrast, if the same employer offers PMI worth £40 a month via a standard taxable benefit:

• There is no income-tax saving from salary sacrifice; the £480 a year value is simply added to taxable income.
• For a basic-rate taxpayer, that means about £96 in extra income tax a year (and £192 for a higher-rate taxpayer), ignoring any knock-on effects on thresholds.

PMI may still be worth having for faster access to care, but it is not a tax-saving tool in the way an EV salary-sacrifice scheme can be.

EV and Bike Schemes – Are They Worthwhile?

These schemes have grown quickly because of relatively generous tax treatment compared with many other workplace benefits.

EV Salary Sacrifice Schemes

Best for: Predictable or regular car use over several years, especially for basic- and higher-rate taxpayers who like a fixed monthly cost and would otherwise lease or finance a car.

Pros

• Tax and NI savings: the car is funded from gross earnings, with a relatively low BiK cost on many EVs compared with most petrol or diesel cars
• Bundled costs: lease, insurance, servicing, tyres and roadside assistance often wrapped into a single monthly deduction
• In 2025/26, the BiK rate for fully electric company cars is scheduled to be 3% of list price, still low compared with many internal-combustion options (with increases planned in later years)

Watch out for

• Early-termination rules: check what happens if you take unpaid leave, reduce hours, go on long-term sickness or maternity, resign, or are made redundant
• Credit and underwriting checks and the exact P11D value (list price including options, not what your employer pays)
• Impact on affordability assessments (e.g., mortgage applications) because your contractual salary will be reduced

From April 2025, most fully electric vehicles are due to become liable for Vehicle Excise Duty (VED). For higher-priced cars, this reduces some of the overall tax advantage, though EVs can still compare favourably to petrol or diesel models when everything is considered.

Cycle to Work Schemes

Best for: Short- to medium-distance commuters, hybrid workers, and anyone who genuinely plans to use a bike or e-bike regularly.

Pros

• Income-tax and NI savings on the salary you sacrifice to hire a qualifying bike and accessories
• Can make e-bikes and safety equipment significantly more affordable
• More flexible than a multi-year car lease and can help reduce other commuting costs

Watch out for

• End-of-scheme arrangements: some providers offer extended hire and a small refundable deposit (often around 3–7% of the original certificate value) so you effectively keep the bike without a large final payment.
• Others may instead charge a separate fair-market-value payment at the end of the hire to transfer ownership; depending on the bike’s value at that point, this could be more than 3–7%.
• As with any salary-sacrifice scheme, arrangements must respect National Minimum/Living Wage rules and can affect the pay used for certain statutory benefits.

Private Medical Insurance: When It Makes Sense

Even though PMI does not save income-tax under salary sacrifice, the scheme may buy fastest access to treatment and the broadest choices.

What Does PMI Typically Cover?

• Consultations with specialists and follow-up appointments
• Diagnostic tests such as MRI, CT and ultrasound
• Planned surgeries and in-patient or day-patient care
• Optional add-ons such as dental and optical cover
• Extras such as mental-health support, virtual GP services or health screening

Benefits

Pros

• Faster access to diagnosis and treatment compared with the standard NHS pathway in many areas
• Choice of hospital and consultant, within your insurer’s network and policy limits
• Ability to add a partner and children, often at a lower per-person cost than buying separate retail policies

Cons

• PMI is a taxable benefit: its value is reported on your P11D or via payrolling of benefits and increases your taxable income
• Premiums typically rise over time, and may rise further after claims
• Pre-existing conditions are often excluded or subject to waiting periods and underwriting
• For higher earners, the extra taxable benefit can contribute to the Child Benefit High Income Charge and tapering of the personal allowance

Example cost impact (2025/26)

If the PMI is worth £45 a month (£540 a year):

• For a basic-rate taxpayer (20%): £108 more in tax each year
• For a higher-rate taxpayer (40%): £216 more in tax each year

It’s for the employer to pick up the bill for the Class 1A NIC on the benefit (for the overall picture).

If it is "worth it" really depends on your health, waiting times in your area, and how much you would spend personally for it.

Employee Giving, PTO & Other Flexible Benefits

Give As You Earn (GAYE) / Payroll Giving

Give As You Earn (GAYE) is a tax-efficient way of making charitable donations directly from your salary via your employer’s payroll.

How it works (simplified):

• Deductions are taken after NI but before income tax is calculated.
• Your marginal saving is therefore the income tax on the donation, not NI.
• Higher- and additional-rate taxpayers get full income-tax relief automatically through payroll, without needing to claim via self-assessment.

Pros

• Easy to give regularly, straight from pay
• Higher-rate relief is applied automatically
• Charities have more predictable monthly income

Considerations

• There is no NI relief, unlike some salary-sacrifice arrangements
• You need an employer that operates a payroll-giving scheme — this is not universally available

Buy/Sell Annual Leave

Many employers allow you to buy extra annual leave (and sometimes sell back days) via a benefits platform.

If the scheme is structured as a qualifying salary-sacrifice arrangement:

• You may obtain income-tax and NI savings on the cost of additional days, compared with buying extra leave from net pay
• The treatment needs to be consistent with wider OpRA rules and the scheme’s legal documentation

Pros

• More time off without changing your core contract
• Potential tax and NI savings compared to buying extra leave from net pay
• Typically subject to clear limits (e.g., buying or selling 1–5 days per year)

Cons

• Lower take-home pay because you are giving up salary
• As with other salary-sacrifice arrangements, there can be knock-on effects on:
  • Meeting National Minimum/Living Wage requirements
  • The reference pay used for statutory payments (e.g., maternity pay)
• The availability and exact tax treatment depend heavily on scheme design and current HMRC guidance

Other common menu items

• Dental insurance
• Gadget cover / home-tech schemes
• Financial wellbeing tools (coaching and advice platforms)
• Retail discount platforms

These are usually about convenience and pricing rather than tax planning. Some can genuinely save money or offer peace of mind; others may simply encourage extra discretionary spending.

Which Way to Go: A Simple Decision Flowchart

These steps are designed to help you prioritise benefits. Just because something is available does not mean you must take it.

Stage 1: Protection First

Start by thinking about how you or your dependants would cope if something went badly wrong:

1. Life assurance – is the sum insured enough for your dependants if you died?
2. Income protection – how long could you pay your bills if you were too ill to work?
3. Critical-illness cover – would a lump sum on diagnosis of a major condition materially reduce financial stress?

These benefits rarely offer big tax savings but can prevent a bad year from becoming a financial crisis.

Stage 2: Transport Choices – EV vs Bike vs Status Quo

• If you drive regularly and have access to charging at home or work, an EV salary-sacrifice scheme can be attractive, especially while BiK rates remain relatively low
• If your commute is practically bike-friendly (for example up to around 10 miles/16 km round trip), a Cycle to Work scheme can be a cheaper, healthier alternative
• In either case, consider how often you will actually use the benefit and how easily you could manage if circumstances change

Stage 3: Access to Healthcare

Ask yourself:

• Could you reasonably rely on the NHS in your area, given current waiting times?
• Would faster diagnosis and treatment materially reduce stress or time off work for you or your family?

If the answer is “yes”, employer-sponsored PMI (even with some taxable benefit) may be worth the cost. Just remember it is a taxable benefit and not a tax-saving tool.

Stage 4: Cash-Flow and Commitments

For each salary-sacrifice option, check:

• How much monthly take-home pay will I give up?
• How much emergency savings do I have for unexpected expenses?
• Am I planning to apply for a mortgage or remortgage, where a lower contractual salary might reduce how much I can borrow?
• Will the sacrifice keep me safely above the National Minimum/Living Wage and avoid undesired impacts on state benefits?

If the answers leave you feeling stretched, scale back or delay commitments.

Stage 5: Make the Most of Employer Contributions

Pay particular attention to:

• Employer pension contributions, especially where salary sacrifice boosts both employer and employee NI efficiency
• Employer-paid life cover and income protection, which can be very cost-effective
• Subsidised EV or bike schemes
• Employer-paid PMI tiers, where you only pay to upgrade or add family members

As a rule of thumb, heavily subsidised or fully employer-funded benefits are often worth taking – but still read the policy terms and understand any tax consequences.

Stage 6: Optional “Nice-to-Haves”

Once the essentials are in place:

• Set GAYE/Payroll Giving at a level that is meaningful but affordable
• Consider buying extra holidays if you will genuinely value the time off
• Use other discount schemes or wellbeing tools if they clearly help you save money or improve your wellbeing, rather than adding noise to your finances

A Sample Text Guide for Questioning HR and Payroll

You can adapt wording like this when asking your employer for clarity:

"I’m reviewing my benefits for the upcoming year and want to understand the tax and practical implications. Are your EV and Cycle to Work schemes operated via salary sacrifice, and what are the termination rules if I change role, go on maternity leave or leave the organisation? Is PMI treated as a P11D benefit or payrolled, and could you share last year’s P11D or benefits statement so I can see what was reported?"

If you are considering large sacrifices (for example, EV plus a high pension sacrifice), also ask:

"Please confirm how salary sacrifice affects statutory payments such as maternity pay, sick pay and redundancy pay, and whether there are any minimum-wage or state-benefit implications I should be aware of."

Conclusion

Open enrolment is your yearly opportunity to tune your benefits around lifestyle, health and finances. By understanding how salary sacrifice interacts with UK tax rules, comparing the true cost of each benefit (including BiK and VED for cars) and choosing options you will genuinely use, you can build a package with both take-home value and day-to-day wellbeing in mind.

If you want to see how these choices affect your net pay right now, use our salary calculator for a quick personalised breakdown.

Choosing well now sets you up for a smoother, more confident year ahead — and fewer surprises from HMRC.

Further Reading

• GOV.UK: Salary Sacrifice
• GOV.UK: Optional Remuneration Arrangements
• GOV.UK: Benefits in Kind and P11D
• GOV.UK: Payroll Giving
• Any custom-made benefits handbook and scheme document from the employer