How the salary sacrifice calculator works
With pension salary sacrifice (sometimes called salary exchange or SMART pensions), you agree to a lower salary and your employer pays the difference straight into your pension. Because your salary is lower, you pay less income tax and less National Insurance, and so does your employer. This calculator works out your pay twice for 2026/27, once with no pension sacrifice and once with it, and shows the difference.
It uses the same 2026/27 rates as our take-home pay calculator: the £12,570 Personal Allowance, income tax at 20%, 40% and 45% (or the six Scottish rates), and employee National Insurance at 8% between £12,570 and £50,270 and 2% above that.
Worked example: £40,000 salary, 5% sacrifice
You sacrifice 5% of a £40,000 salary, which is £2,000 a year, so your new salary is £38,000.
| No sacrifice | Salary sacrifice | |
|---|---|---|
| Salary | £40,000 | £38,000 |
| Income tax | £5,486 | £5,086 |
| National Insurance | £2,194.40 | £2,034.40 |
| Take-home pay | £32,319.60 | £30,879.60 |
| Into your pension | £0 | £2,000 |
Your take-home pay drops by £1,440, but £2,000 goes into your pension. You save £400 income tax and £160 National Insurance, so each £1 in your pension costs you 72p. Your employer saves £300 in employer NI, and some employers add that to your pension too.
Higher rate taxpayers save more
On a £60,000 salary, sacrificing £10,000 brings your pay down to £50,000. Income tax falls by £3,946 and National Insurance by £216.20, so your take-home pay only drops by £5,837.80 for £10,000 in your pension, or about 58p per £1.
Escaping the 60% tax trap
Between £100,000 and £125,140 you lose £1 of Personal Allowance for every £2 you earn. Sacrificing £10,000 of a £110,000 salary saves £6,000 in income tax and £200 in NI, so your take-home pay falls by just £3,800. It can also bring your income back under the £100,000 limit for 30 hours of free childcare.
Salary sacrifice compared with other pension types
- Relief at source: you pay from your take-home pay and get 20% added by your provider. Higher rate taxpayers claim the extra back through Self Assessment. No NI saving.
- Net pay: your contribution comes off before income tax, so you get full tax relief straight away. No NI saving.
- Salary sacrifice: full income tax relief plus an 8% (or 2%) National Insurance saving, plus your employer's 15% saving.
Things to check before you sign up
- Minimum wage: your employer can't let sacrifice take your pay below the National Minimum Wage.
- Mortgages and borrowing: lenders may look at your lower contractual salary.
- Benefits linked to salary: life cover, overtime rates and Statutory Maternity Pay can be based on the lower figure, although many employers use a "notional" salary.
- Annual allowance: total pension savings above £60,000 a year (less for very high earners) can trigger a tax charge.
- Child Benefit: sacrifice lowers your adjusted net income, which can reduce or remove the High Income Child Benefit Charge. Try the Child Benefit calculator.
Changes coming in April 2029
Nothing changes for 2026/27: the whole amount you sacrifice is free of National Insurance. From April 2029 the government plans to limit the NI saving to the first £2,000 a year sacrificed into a pension. Anything above £2,000 will still be free of income tax but will have employee and employer NI charged on it, like other pension contributions.
To see how your extra contributions could grow, use the pension calculator, or see the full NI rules on the National Insurance calculator.
Frequently asked questions
How much does salary sacrifice save?
A basic rate taxpayer saves 20% income tax and 8% National Insurance on the amount sacrificed, so £100 into a pension costs £72 in take-home pay. A higher rate taxpayer saves 40% tax and 2% NI, so £100 costs about £58.
Is salary sacrifice worth it?
For most employees it's the cheapest way to save into a pension, because you get National Insurance relief as well as income tax relief. It's worth checking the effect on mortgages, life cover and any salary-linked benefits first.
Is salary sacrifice changing in 2026/27?
No. For 2026/27 all pension salary sacrifice is free of income tax and National Insurance. The government plans to cap the NI-free amount at £2,000 a year from April 2029.
Can salary sacrifice get me under £100,000?
Yes. Your pay after sacrifice is your taxable salary, so sacrificing enough to bring it down to £100,000 restores your full Personal Allowance and avoids the 60% tax trap.
Does salary sacrifice reduce my student loan repayments?
Yes. Student loan repayments are worked out on your pay after sacrifice, so they fall by 9% of the amount sacrificed if you earn above your plan's threshold.
Last reviewed October 2026 using 2026/27 figures. This calculator gives an estimate for guidance only.