UK Salary Sacrifice Calculator 2026/27
See what a pension salary sacrifice really costs you. Enter your salary and the amount you want to sacrifice each year to compare Income Tax, National Insurance and student loan deductions before and after, plus the cash you give up for every £100 added to your pension.
| Item | Without sacrifice | With sacrifice | Difference |
|---|---|---|---|
| Gross pay after sacrifice | £60,000.00 | £55,000.00 | -£5,000.00 |
| Income Tax | £11,432.00 | £9,432.00 | -£2,000.00 |
| National Insurance | £3,210.60 | £3,110.60 | -£100.00 |
| Cash take-home | £45,357.40 | £42,457.40 | −£2,900.00 |
| Into your pension | £0 | £5,000.00 | +£5,000.00 |
How it works
Salary sacrifice is a contractual change: you agree to a lower gross salary and your employer pays the difference into your pension. Because Income Tax, employee National Insurance and student loan repayments are all calculated on the reduced salary, the amount reaching your pension is larger than the take-home pay you give up.
Why it beats a normal contribution on NI
A personal pension contribution gets Income Tax relief, but employee National Insurance has already been charged on the money. Under salary sacrifice the contribution never counts as your earnings, so the 8% main rate or 2% upper rate of National Insurance is never deducted either. That extra saving is what makes sacrifice more efficient for most employees.
The marginal rate that applies
Savings depend on the band the sacrificed slice comes from. A basic-rate taxpayer saves 20% tax plus 8% National Insurance, a higher-rate taxpayer saves 40% plus 2%, and Scottish taxpayers save at the Scottish rates for their band. Add 9% if the slice is above your student loan threshold.
The Personal Allowance taper sweet spot
Between £100,000 and £125,140 the Personal Allowance falls by £1 for every £2 earned, creating an effective 60% Income Tax rate. Sacrificing salary back below £100,000 restores the allowance, so the cash cost of each £100 into the pension can drop to around £38.
What to check before you commit
Your reduced salary is the figure lenders, insurers and some statutory payment calculations will use, and you cannot sacrifice below the National Minimum Wage. Compare the result here with the take-home pay calculator to see the full picture of your monthly pay.
Worked example
£60,000 salary, £5,000 sacrificed, rest of UK, no student loan.
- The £5,000 comes out of income taxed at 40%, saving £2,000 of Income Tax.
- It is above the £50,270 Upper Earnings Limit, so National Insurance at 2% saves a further £100.
- Cash take-home falls by £2,900 while £5,000 lands in the pension — an effective cost of £58 per £100 contributed.
On a £40,000 salary the same £5,000 is sacrificed from basic-rate income, saving 20% tax and 8% National Insurance, so take-home falls by £3,600 — £72 per £100.
Limitations of this calculator
- Shows your own savings only; any employer National Insurance saving passed into your pension is extra.
- Assumes the standard Personal Allowance and no tax-code adjustments.
- Does not check the pension annual allowance, the tapered allowance or the money purchase annual allowance.
- Does not test whether the reduced salary stays above the National Minimum Wage.
- Ignores knock-on effects on mortgage borrowing, life cover, redundancy pay and statutory payments.
- Guidance only — check with your employer and pension scheme before acting.
Frequently asked questions
What is salary sacrifice?
You agree with your employer to give up part of your contractual salary in return for a non-cash benefit, most often a pension contribution. Because your gross pay falls, you pay less Income Tax and National Insurance, so the cash cost to you is smaller than the amount paid into the pension.
How much does £100 into my pension actually cost me?
It depends on your marginal rates. A basic-rate taxpayer typically gives up about £72 of take-home pay for every £100 sacrificed, a higher-rate taxpayer about £58, and someone in the £100,000 to £125,140 Personal Allowance taper band can give up far less. The calculator shows your own figure.
Does salary sacrifice reduce student loan repayments?
Yes. Repayments are based on your reduced gross pay, so sacrificing salary lowers the amount deducted for an undergraduate plan or Postgraduate Loan. The saving is included in the totals here when you select a plan.
What are the downsides?
A lower salary can reduce mortgage borrowing, life cover set as a multiple of salary, redundancy pay and some statutory payments such as Maternity Pay. Your salary cannot be sacrificed below the National Minimum Wage, and reversing the arrangement usually requires a lifestyle event.
Does my employer pass on its National Insurance saving?
Employers also save Class 1 secondary National Insurance, and many pass some or all of it into your pension. This calculator shows only your own savings, so treat any employer top-up as extra value on top of the figures here.
Is there a limit on how much I can sacrifice?
Pension contributions are limited by the annual allowance, which is tapered for very high earners and reduced once you have flexibly accessed a pension. Sacrifice above your allowance can create a tax charge, so check with your scheme before making large changes.
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Official sources
Figures on this page follow official UK government guidance for the 2026/27 tax year. Rates last verified: 27 August 2026. See our data sources and calculation methodology.
Estimates for general guidance only — not personalised financial advice.