Tax year 2026/27 · England, Wales and Northern Ireland bands
Salary Sacrifice Pension Calculator
Give up salary, gain a pension contribution, and skip both the income tax and the National Insurance on that slice. This shows what a sacrifice saves you and what it really costs.
Account of pension contribution · 2026/27
Gross pay before any sacrifice.
Salary given up in exchange for a pension contribution.
- Income tax saved£600.00
- Employee National Insurance saved£240.00
Going into your pension£3,000.00
Real cost in take-home pay£2,160.00
Every £1 in the pension costs you £0.72 of take-home pay.
How salary sacrifice works
You agree with your employer to reduce your contractual salary, and your employer pays the same amount into your pension as an employer contribution. Because that slice of pay never reaches you, it never gets taxed and never carries National Insurance.
That NI point is the whole advantage over paying into a pension from your bank account. A personal contribution claims back the income tax, but the 8% employee NI (2% above £50,270) is already gone by the time the money hits your payslip. Sacrifice avoids it at the source.
Your employer wins too: they save 15% employer NI on every pound sacrificed. A generous employer adds that saving to your pension, which the toggle above models. Even without it, sacrifice beats a personal contribution for almost everyone in employment.
Watch-outs before you sign
The minimum wage floor. Sacrifice cannot take your contractual pay below the National Minimum Wage. Your employer is required to block an arrangement that would, so lower earners have a hard cap on how much they can sacrifice.
Statutory pay references. Statutory maternity, paternity, adoption and sick pay are calculated from your post-sacrifice salary. So are some death-in-service benefits and, with some lenders, the income figure on a mortgage application. If any of those are on the horizon, time the change carefully.
It is a contract change. Salary sacrifice amends your employment contract, so it usually locks for a period or until a life event. You cannot dial it up and down from month to month the way you can a personal contribution.
Common questions
How is salary sacrifice different from paying into a pension myself?
A personal contribution gets tax relief but you still pay National Insurance on the money first. With salary sacrifice the pay never exists, so you save the NI as well: 8% if you earn under £50,270, 2% above. On £2,000 sacrificed by a basic rate earner that is an extra £160 a year for nothing.
Can salary sacrifice take my pay below the minimum wage?
No. Your contractual pay after the sacrifice must stay at or above the National Minimum Wage, and employers must refuse an arrangement that would breach it. This is the hard floor on how much you can sacrifice.
Does my employer have to pass on their NI saving?
No. Employers save 15% employer NI on every pound you sacrifice, but what they do with it is their choice. Some add all of it to your pension, some add part, most keep it. Worth one email to payroll to find out.
Does salary sacrifice affect statutory pay or my mortgage application?
It can. Statutory maternity, paternity and sick pay are worked out from your reduced salary, and lenders see the lower figure too. If a big life event or application is coming, check the timing before you raise the sacrifice.
Is there a limit on how much I can put in?
The annual allowance for pension contributions is £60,000 across all sources for most people (lower for very high earners or after flexibly accessing a pension). The minimum wage floor usually bites first for ordinary salaries.
I earn just over £50,270. Why is my NI saving so small?
Above £50,270 employee NI drops to 2%, so the slice you sacrifice up there only saves 2p per pound in NI. The income tax saving is bigger though: 40% instead of 20%. If your sacrifice crosses the threshold, the calculator splits it correctly.
Sacrificing salary also frees up basic rate band, which can pull your dividends down from 35.75% to 10.75%. Check the effect with the dividend tax calculator.