Calculator
Pension Salary Sacrifice Calculator 2026/27
Estimate the exact income tax and NI savings from a pension salary sacrifice arrangement, and the net cost to your take-home pay.
How it 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 lower, you pay less income tax and National Insurance on that portion. Crucially, the sacrifice is never treated as your income — so the relief is immediate rather than claimed via self-assessment.
- Income tax saving depends on your marginal rate — 20%, 40% or 45% in England/Wales/NI.
- Employee NI saving is 8% on sacrifice that falls in the £12,570–£50,270 band, or 2% above £50,270.
- Employer NI saving is 15% of the sacrifice (above the £5,000 secondary threshold). Some employers pass some or all of this back as extra pension contributions.
Worked example
Using the default values — £50,000 salary, £5,000 sacrifice, 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
- Employer passthrough (50%): £375
- Total pension value (sacrifice + passthrough): £5,375
- Net annual cost (sacrifice − tax saving − NI saving): £3,600
- Net monthly cost: £300.00
For every £5,000 put into pension, the actual reduction in take-home pay is only £3,600 — the remaining £1,400 comes from tax and NI savings.
Mortgage affordability and DB pensions
Salary sacrifice reduces your contractual salary. Many mortgage lenders use the post-sacrifice figure when assessing affordability, which can affect how much they will lend. Some lenders add back pension sacrifice — a mortgage broker can identify which lenders are most accommodating.
If you are a defined benefit (DB) pension scheme member, check whether pensionable pay is defined as your pre- or post-sacrifice salary before making changes. See our full guide to the disadvantages of salary sacrifice for more detail.
Frequently asked questions
Is pension salary sacrifice better than a personal pension contribution?
Usually yes. With salary sacrifice you also save employee NI (8% or 2%) on top of income tax relief, whereas a personal (relief-at-source) contribution only claims basic-rate tax at source with higher-rate relief via self-assessment. See our salary sacrifice vs normal pension guide.
Does the employer have to pass on their NI saving?
No — there is no legal requirement. Some employers pass on all of their NI saving as extra pension, others pass on a percentage, and many retain it entirely. It is worth asking your HR or payroll team what your employer's policy is.
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. If you have used the money purchase annual allowance (MPAA) of £10,000, that applies instead. Carry forward of unused annual allowance from prior years may be available.
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.
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.