Salary Sacrifice Calculator
See exactly how much tax and NI you save by sacrificing salary into your pension. 2026/27 tax year.
Before Sacrifice
Gross salary
£0.00
Income tax
£0.00
Employee NI
£0.00
Pension deduction
£0.00
Take-home pay
£0.00
After Sacrifice
Reduced gross salary
£0.00
Income tax
£0.00
Employee NI
£0.00
Pension deduction
£0.00
Take-home pay
£0.00
Your Savings
Income tax saved
£0.00
NI saved
£0.00
Total tax saved (annual)
£0.00
Pension contribution (employer pays)
£0.00
Actual cost to you (take-home reduction)
£0.00
Effective cost per £1 of pension
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Salary Sacrifice Savings by Salary
| Salary |
Sacrifice /mo |
Annual saving |
Cost per £1 |
How Salary Sacrifice Works
Salary sacrifice (sometimes called "salary exchange") is an arrangement between you and your employer. You agree to give up part of your gross salary, and in return your employer pays that amount directly into your pension. Because the sacrifice happens before tax and National Insurance are calculated, you pay less of both.
Why it saves you money
With a normal pension contribution, the money comes out of your net pay (after tax and NI have been deducted). With salary sacrifice, your gross salary is reduced first, so you never pay tax or NI on the sacrificed amount. The saving is the tax and NI you would have paid on that portion of salary.
Basic rate example
Salary: £35,000 | Sacrifice: £200/month (£2,400/year)
Tax saved: £2,400 x 20% = £480
NI saved: £2,400 x 8% = £192
Total saved: £672/year
You sacrifice £2,400, but your take-home pay only drops by £1,728. Effective cost: 72p per £1 of pension.
Higher rate example
Salary: £65,000 | Sacrifice: £500/month (£6,000/year)
Tax saved: £6,000 x 40% = £2,400
NI saved: £6,000 x 2% = £120
Total saved: £2,520/year
You sacrifice £6,000, but your take-home pay only drops by £3,480. Effective cost: 58p per £1 of pension.
Things to consider
Salary sacrifice reduces your official gross salary. This can affect mortgage applications, salary-based benefits such as statutory maternity pay, and any income protection policies linked to your salary. It also reduces your entitlement to state benefits if your salary drops below the NI lower earnings limit. Always check with your employer and financial adviser before making changes.
Salary Sacrifice FAQs
What is salary sacrifice for pensions?
Salary sacrifice is an arrangement where you agree to a lower gross salary in exchange for your employer making additional pension contributions on your behalf. Because your gross salary is reduced before tax and National Insurance are calculated, you pay less of both. The pension contribution comes from your employer, not from your take-home pay.
How much tax do I save with salary sacrifice?
The tax saving depends on your tax band. Basic rate taxpayers save 20% income tax plus 8% employee NI on the sacrificed amount, giving a combined saving of 28%. Higher rate taxpayers save 40% income tax plus 2% NI (42% combined) on the portion above the higher rate threshold. Additional rate taxpayers save 45% income tax plus 2% NI (47% combined).
Does salary sacrifice affect my mortgage application?
Yes. Salary sacrifice reduces your gross salary on paper, which is what mortgage lenders typically use to assess affordability. A lower gross salary could reduce the amount you can borrow. Some lenders will consider your pre-sacrifice salary if you provide a letter from your employer confirming the arrangement, but this varies between lenders.
Can I sacrifice below the National Minimum Wage?
No. Your employer cannot reduce your salary below the National Minimum Wage or National Living Wage through a salary sacrifice arrangement. For 2026/27, the National Living Wage for workers aged 21 and over is expected to be around £12.21 per hour. Your employer should check that your post-sacrifice salary remains above the minimum.
Does my employer save money too?
Yes. Your employer pays 13.8% employer National Insurance on your salary. When your salary is reduced through sacrifice, they pay less employer NI. Many employers pass some or all of this saving back to you as an additional pension contribution, making salary sacrifice even more valuable. This calculator shows the employee savings only.