UK Salary Sacrifice Pension Calculator

Salary Sacrifice Guide

How Salary Sacrifice Works

Salary sacrifice reduces your contractual gross salary by the pension contribution amount before tax and NI are calculated. Because both tax and NI are charged on the lower salary, you save both. A basic rate taxpayer sacrificing £200/month: saves £40 income tax (20%) plus £20 NI (10%) = £60 saved. The £200 pension contribution costs only £140 in take-home pay. Higher rate: saves £80 tax + £20 NI = £100 saved — the £200 contribution costs only £100. This makes salary sacrifice far more efficient

Employer NI Saving

Employers also save 13.8% NI on salaries above the secondary threshold (£9,100/year in 2026/27). When an employee sacrifices £200/month, the employer saves approximately £27.60/month in employer NI. Many employers pass this saving to the employee's pension — making it even more tax-efficient. Always ask your HR or payroll department whether your employer operates an NI sharing arrangement. Even where they do not, salary sacrifice remains the most tax-efficient way to contribute to a pension for

Important Considerations

Salary sacrifice reduces your contractual salary — this can affect: mortgage affordability calculations (lenders use gross salary, though many now understand salary sacrifice arrangements). State benefit entitlements (some benefits reference gross salary). Life cover and income protection (often calculated as a multiple of salary). Death-in-service benefits. Crucially, your adjusted gross salary must not fall below the National Living Wage (£11.44/hour in 2026/27) — sacrifice cannot take salary

Optimising Your Contribution

The £100,000 personal allowance trap: if salary sacrifice brings your adjusted net income below £100,000, you recover Personal Allowance that is otherwise tapered away at an effective 60% rate. Sacrificing salary above £100,000 to below £100,000 recovers £1 of allowance per £2 sacrificed — creating an effective 60% tax relief rate on those pounds. Similarly, if you are just above the higher rate threshold (£50,270 in 2026/27), salary sacrifice that reduces salary below this threshold switches th