A £2,000 pension sacrifice on a £40,000 salary saves approximately £560 in income tax and NI in 2026/27. The net cost to your take-home pay is £120/month.
With a £40,000 gross salary, a £2,000 pension sacrifice reduces your taxable salary to £38,000. You pay income tax and National Insurance on the lower figure, not the original £40,000.
At £40,000, your salary sits within the basic-rate (20%) income tax band. Each £1,000 sacrificed saves £200 in income tax, plus £80 in employee NI (at the 8% rate below £50,270) — a combined saving of £280 per £1,000 sacrificed.
The £2,000 goes into your pension. You receive the full £2,000 pension contribution, but your take-home pay only falls by £1,440 per year (£120/month) — the difference is the tax and NI you no longer pay.