Salary Sacrifice Calculator
Our salary sacrifice calculator shows exactly how much you save in income tax and National Insurance by diverting part of your gross pay directly into your pension or other qualifying benefits before any deductions are made. For many employees, salary sacrifice is the most tax-efficient way to save — particularly for pension contributions — and the savings are often larger than people expect.
Salary Sacrifice Calculator
See how much you could save on tax and NI through salary sacrifice for 2026/27.
What Is Salary Sacrifice?
Salary sacrifice is a formal arrangement with your employer where you agree to give up a portion of your gross salary in exchange for a non-cash benefit of equal value. The most common use is workplace pension contributions, but salary sacrifice also applies to cycle-to-work schemes, electric vehicle lease schemes, childcare vouchers (pre-October 2018 schemes only), and some health and wellbeing benefits.
Because the sacrifice happens before income tax and National Insurance are calculated, you save both. A basic rate taxpayer making a £2,000 annual salary sacrifice saves £400 in income tax plus £160 in NI — a total saving of £560. Your employer also saves NI at 15% on the sacrificed amount, and many employers share some of this saving by increasing the pension contribution they make on your behalf.
Salary Sacrifice Example 2026/27
On a salary of £45,000 with a 5% pension salary sacrifice (£2,250 per year), your taxable salary reduces to £42,750. Income tax falls by £450 and NI falls by £180 — a combined saving of £630 per year, or £52.50 per month. The full £2,250 enters your pension, but it has only cost you £1,620 net — making your effective pension contribution rate much better than the headline 5% suggests.
Higher rate taxpayers see even greater savings. A £5,000 sacrifice on a £55,000 salary saves £2,000 in income tax (40%) plus £400 in NI — a total of £2,400, meaning a £5,000 pension contribution costs just £2,600 after tax relief.
Frequently Asked Questions
It reduces your gross pay on paper, but the tax saving partially offsets the impact on take-home pay. A £100/month salary sacrifice costs a basic rate taxpayer only £72 in net take-home pay — because £28 is saved in combined tax and NI. Use our Take-Home Pay Calculator to compare your net pay before and after sacrifice.
Yes — lenders typically assess affordability based on your contractual salary, which is the reduced post-sacrifice figure. If your lender uses your P60 or payslip gross salary, this lower figure may reduce the amount you can borrow. Discuss this with your employer and lender before applying.
Not directly. Your State Pension entitlement is based on qualifying National Insurance contributions, which are based on your actual earnings. If your post-sacrifice salary falls below the Lower Earnings Limit (£6,396 in 2026/27), you may lose a year’s NI credit — but this is rare for most workers.
You can contribute up to the Annual Allowance of £60,000 into your pension each tax year and receive tax relief. If your adjusted income exceeds £260,000, the tapered annual allowance reduces this — potentially to as low as £10,000 for very high earners.
Yes. Electric vehicle salary sacrifice schemes are popular because the Benefit in Kind tax rate for fully electric cars is just 3% in 2026/27 — far below the cost of leasing the same car from net pay. The saving in income tax, NI, and fuel costs can make an EV significantly cheaper than it appears. See our Taxable Benefits Calculator to estimate the BIK charge.
Enter your current salary and the monthly amount to sacrifice. Salary sacrifice exchanges gross pay for an employer-provided benefit — most commonly pension contributions. Because the sacrifice reduces gross pay before tax and NI are calculated, you save both income tax and NI on the amount sacrificed, making it more efficient than a standard employee pension contribution. The employer also saves Class 1 NI, which some employers pass on as an additional pension contribution. Results show pre- and post-sacrifice take-home pay, NI savings, and the effective cost of the pension contribution after reliefs. Important: salary sacrifice reduces your gross pay for statutory purposes — maternity pay, mortgage affordability assessments, and some benefits are calculated on your post-sacrifice salary.
Important Information
This calculator is provided for general information and planning purposes only. It does not constitute financial or tax advice and should not be relied upon as such. Figures are indicative estimates based on simplified, publicly available criteria and stated assumptions. Actual results depend on your full circumstances. See our Disclaimer for further information.