Salary Sacrifice Calculator

How salary sacrifice works

Normally you are paid your salary, then tax and National Insurance come off, then you might pay into a pension from what is left. Salary sacrifice changes the order: you agree to a lower salary, and your employer pays the difference straight into your pension. Because that money is never treated as your pay, it escapes income tax and employee National Insurance, so more reaches your pension for the same hit to your take-home. Salary sacrifice explained covers the trade-offs, including how it can affect mortgage borrowing and statutory pay.

To see how the sacrifice changes your monthly pay packet, try the take-home pay calculator at your reduced salary.

Common questions

What is salary sacrifice?

Salary sacrifice is an agreement to give up part of your gross salary in return for your employer paying it straight into your pension. Because the money never counts as your salary, you pay no income tax or National Insurance on it, so more of it ends up working for you.

How does salary sacrifice save me money?

The sacrificed amount comes off your pay before income tax and employee National Insurance are worked out. So a basic-rate taxpayer saves 20% tax and 8% NI on it, meaning £100 into the pension costs only about £72 of take-home. Higher-rate taxpayers save even more tax, though only 2% NI above the Upper Earnings Limit.

Does my employer save money too?

Yes. Employers pay National Insurance on your salary at 15% in 2026/27, and sacrifice lowers the pay they pay it on, so they save too. Some employers choose to add that saving to your pension on top, which boosts your pot further. Use the toggle above to include it.

Are there any downsides to salary sacrifice?

A lower salary on paper can reduce things linked to your earnings: mortgage borrowing, statutory maternity pay, and some benefits. Your pay cannot be sacrificed below the National Minimum Wage. And the money is locked in a pension until at least age 55, rising to 57 from 2028.

Is there a limit on how much I can sacrifice?

Pension contributions, including those made by sacrifice, count towards the annual allowance, which is £60,000 for most people in 2026/27. Sacrifice also cannot take your pay below the National Minimum Wage, so very large sacrifices on a modest salary may not be allowed.

What changes in April 2029

Worth knowing before you set one of these up, because a sacrifice arrangement is usually left running for years. The government has published a reform that takes effect on 6 April 2029: from that date, earnings you give up under a salary sacrifice scheme above £2,000 in a tax year will attract Class 1 National Insurance, both the employee's and the employer's. Below £2,000 nothing changes.

The government estimates it affects 3.3 million of the roughly 7.7 million employees who currently use salary sacrifice for pensions. Everyone sacrificing £2,000 a year or less is unaffected. It does not apply in the 2026/27 tax year, so every figure above is unchanged by it.

We have not modelled the position after the change, because the National Insurance thresholds for 2029/30 have not been set and a number built on guesses would be worse than no number. The rule itself is published by gov.uk.

About this calculator

Uses the 2026/27 income tax bands, employee National Insurance (8% to the Upper Earnings Limit, then 2%) and employer National Insurance (15% above the £5,000 secondary threshold), verified against gov.uk. It compares your take-home with and without the sacrifice, so the saving is band-aware. The result is an estimate to help you plan, not tax advice. Confirm with HMRC or a financial adviser. Last updated June 2026.