Calculator
UK Salary Sacrifice Calculator 2026/27
Estimate the income tax and NI savings from a pension salary sacrifice arrangement, the total pension value including any employer NI passthrough, and the net monthly cost to your take-home pay.
How salary sacrifice works
Under a pension salary sacrifice arrangement, you give up part of your gross salary and your employer pays an equivalent amount directly into your pension. Because your gross pay is reduced, you pay less income tax and National Insurance. Your employer also saves employer NI (15% from April 2025), and many pass some or all of this back as extra pension contributions.
- Income tax saving — 20%, 40% or 45% depending on where the sacrifice falls in your tax band.
- Employee NI saving — 8% on sacrifice in the £12,570–£50,270 band, or 2% above £50,270.
- Employer NI saving — 15% of the sacrifice above the £5,000 secondary threshold.
Worked example
For a £50,000 salary with £5,000 annual sacrifice and 50% employer passthrough:
- Income tax saving: £5,000 × 20% = £1,000
- Employee NI saving: £5,000 × 8% = £400
- Total saving: £1,400
- Employer NI saving: £5,000 × 15% = £750
- 50% employer passthrough: £375
- Total pension value (sacrifice + passthrough): £5,375
- Net annual cost to take-home: £3,600 (£300/month)
For every £5,000 into pension, only £3,600 comes from your take-home pay — the rest is tax and NI savings.
Frequently asked questions
Does salary sacrifice affect mortgage borrowing?
Salary sacrifice reduces your contractual salary. Many mortgage lenders use the post-sacrifice figure when assessing affordability. Some lenders add back pension sacrifice — a mortgage broker can identify which lenders are most accommodating.
Is the employer required to pass on their NI saving?
No — there is no legal requirement. Some employers pass on all of it, some pass on a percentage, and some retain it. It is worth asking your HR or payroll team what your employer's policy is.
What if my salary is above £100,000?
If your income exceeds £100,000, your personal allowance tapers at £1 for every £2 over, creating an effective 60% marginal rate between £100,000 and £125,140. Salary sacrifice can restore part or all of your personal allowance. Use our £100k tax trap calculator for this scenario.
How much can I sacrifice into pension?
The annual allowance for pension contributions in 2026/27 is £60,000 (or 100% of your earnings, whichever is lower). Total contributions include both employer and employee amounts. Carry forward of unused annual allowance from the previous 3 years may be available.
How HMRC treats salary sacrifice
HMRC recognises salary sacrifice as a formal, PAYE-compliant arrangement. The key principle: salary sacrifice reduces your contractual gross pay — it is not a deduction made after the fact. This is why the tax treatment is so favourable.
Because your gross salary is lower, three calculations all produce smaller numbers:
- Income tax — PAYE is applied to your reduced gross, saving 20%, 40% or 45% on the sacrificed amount depending on your tax band.
- Employee National Insurance — NI is also assessed on your reduced gross, saving 8% on earnings between £12,570 and £50,270, or 2% above £50,270.
- Employer National Insurance — Your employer pays 13.8% employer NI on gross earnings above the £5,000 secondary threshold. The sacrifice reduces this bill by 13.8% of the sacrifice amount, which is why many employers offer to pass the saving on.
HMRC guidance (EIM42750) confirms that a valid salary sacrifice must involve a genuine, irrevocable contract variation — not just a standing instruction. Arrangements that allow the employee to switch freely in and out are not treated as salary sacrifice and do not attract these savings. For full details see GOV.UK: Salary sacrifice and the effects on PAYE.
Official sources
This calculator provides estimates only. It does not constitute financial, tax or legal advice. Always check current GOV.UK guidance and consult a qualified adviser before making decisions.