Salary sacrifice savings by salary
| Salary | Sacrifice /mo | Annual saving | Cost per £1 |
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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
You sacrifice £2,400, but your take-home pay only drops by £1,728. Effective cost: 72p per £1 of pension.
Higher rate example
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.
More worked examples for 2026/27
The examples above cover a simple basic rate and higher rate case. The three below show where the answer is less obvious. Each was run through the calculator with the inputs shown, using England, Wales and Northern Ireland income tax, employee National Insurance at category A, and a monthly sacrifice.
£52,000 salary, £300 a month: a sacrifice that crosses the higher rate line
The £3,600 sacrifice takes pay down to £48,400, below the £50,270 point where higher rate tax and the 2% National Insurance rate start. So the first £1,730 saves 40% tax and 2% NI, and the remaining £1,870 saves 20% tax and 8% NI. Tax saved is £1,066.00 and NI saved £184.20, a total of £1,250.20. Take-home pay falls by £2,349.80 for £3,600 going into the pension.
£106,000 salary, £500 a month: getting back under £100,000
At £106,000 the personal allowance is cut by £3,000. Sacrificing £6,000 brings pay to exactly £100,000 and restores the full allowance, so the tax saved is £3,600.00 rather than 40% of £6,000. With £120 of NI the total saving is £3,720.00, and the pension gets £6,000 for a £2,280.00 drop in take-home pay.
£28,000 salary, already paying 5%, adding £100 a month
The extra £1,200 saves £336.00 in tax and NI. But the existing 5% contribution is a percentage of salary, so it falls from £1,400.00 to £1,340.00 when salary drops. The calculator counts that as part of the change in take-home pay, which is why the cost shows as £804.00. Many employers avoid this by working out pension percentages on your pay before the sacrifice; ask yours which they use.
Rules that change the answer
The National Minimum Wage floor
A sacrifice must not take your cash pay below the National Minimum Wage. Employers must also change your contract each time you join, leave or change the arrangement, so it cannot be backdated (GOV.UK: Salary sacrifice and the effects on PAYE, checked 30 October 2026).
Statutory pay and benefits
The same guidance says a lower salary can reduce statutory payments such as Statutory Maternity Pay, and if it takes average weekly earnings below the lower earnings limit, the employer does not have to make statutory payments at all. Check before a sacrifice that overlaps a period you are using to qualify.
The £2,000 National Insurance limit from April 2029
From 6 April 2029, pension salary sacrifice above £2,000 in a tax year will attract employee and employer National Insurance. Income tax relief is unchanged, and the sacrifice still lowers adjusted net income for the £100,000 taper (HMRC policy paper, published 4 December 2025, checked 30 October 2026). This calculator uses 2026/27 rules, where there is no limit.
Child Benefit
The High Income Child Benefit Charge starts when adjusted net income goes over £60,000. A sacrifice reduces that figure, so someone just over £60,000 can keep more Child Benefit (GOV.UK: High Income Child Benefit Charge, checked 30 October 2026).
Common mistakes
Using it for a Scottish salary without adjusting. Scottish income tax rates apply to wages, so the tax part of the saving differs in Scotland. The NI saving is the same across the UK. This calculator uses the rates for the rest of the UK.
Counting the employer's NI saving as yours. Your employer also pays less NI on the sacrificed pay. Some pass part of it into your pension, but the calculator only shows your own saving.
How this calculator works: it works out income tax and employee NI on your salary before and after the sacrifice, using the 2026/27 personal allowance (tapered over £100,000), the 20%, 40% and 45% bands and NI at 8% and 2%, then reports the difference. Rates were checked against GOV.UK on 30 October 2026, and every source is listed on our methodology page.