Salary Sacrifice Calculator 2026/27 — Save Tax & NI
Calculate exactly how much you save by sacrificing salary into your pension. See the Income Tax and NI savings, the actual reduction in take-home pay, and the real cost per pound going into your pension pot.
Your Details
Total Annual Tax Saving
£0
£0 less take-home for £0 in pension
Monthly Before
£0
Monthly After
£0
Income Tax Saved
£0
NI Saved
£0
Total Saving
£0
Into Pension
£0
Cost per £1
£0
Saving Rate
0%
How Salary Sacrifice Works
Salary sacrifice is an agreement between you and your employer to reduce your contractual salary. Your employer then pays the sacrificed amount directly into your pension. Because this happens before Income Tax and National Insurance are calculated, you save both taxes on the full amount — making it the most tax-efficient way to contribute to a pension.
For a basic rate taxpayer, every £1 sacrificed costs just £0.72 in lost take-home pay (saving 20% tax + 8% NI). For a higher rate taxpayer it costs only £0.52 (saving 40% + 8%). And for someone in the £100k-£125k PA taper zone, the effective saving can exceed 60%.
Your employer also saves their 15% NI on the sacrificed amount (employer NI rate from April 2025). Many employers pass some or all of this saving back to you as an additional pension contribution, making the arrangement even more beneficial.
What You Need to Know About Salary Sacrifice
Your reduced salary must not fall below the National Minimum Wage. Salary sacrifice also reduces your headline salary, which can affect mortgage applications, maternity pay (SMP is based on actual earnings), and other benefits linked to salary. Some employers offer "flexible" sacrifice arrangements that can be adjusted or opted out of.
Student loan repayments are calculated on pre-sacrifice earnings, so salary sacrifice does not reduce your student loan payments. The annual pension allowance of £60,000 applies to the total amount going into your pension, including any employer contributions and the sacrificed amount.
Salary sacrifice examples 2026/27
Three worked examples showing the real cost and savings of salary sacrifice at different income levels.
£300/month sacrifice on £35,000 salary (basic rate)
Annual sacrifice: £3,600 | Reduced salary: £31,400
Income Tax saved: £3,600 × 20% = £720
NI saved: £3,600 × 8% = £288
Total saving: £1,008 | Actual take-home reduction: £2,592/year (£216/month)
Every £1 into your pension costs you just £0.72 in lost take-home pay.
£500/month sacrifice on £55,000 salary (higher rate)
Annual sacrifice: £6,000 | Reduced salary: £49,000 (drops below higher rate threshold)
Income Tax saved: £6,000 × 40% = £2,400
NI saved: £4,730 at 2% + £1,270 at 8% = £196.20
Total saving: £2,596.20 | Actual take-home reduction: £3,403.80/year (£283.65/month)
By dropping below £50,270, you avoid the 40% rate entirely on the sacrificed amount. Each £1 costs just £0.57.
£1,000/month sacrifice on £100,000 salary (avoids PA taper)
Annual sacrifice: £12,000 | Reduced salary: £88,000
By reducing below £100,000, you keep your full £12,570 Personal Allowance
Income Tax saved: £12,000 × effective 60% = £7,200 (includes PA taper recovery)
NI saved: £12,000 × 2% = £240
Total saving: £7,440 | Actual take-home reduction: £4,560/year (£380/month)
This is the most powerful use of salary sacrifice. Each £1 into your pension costs just £0.38 in lost take-home pay.
Frequently Asked Questions
What is salary sacrifice for pension?
An arrangement where you agree to a lower salary and your employer pays the difference into your pension. You save both Income Tax and NI because the sacrifice happens before these are calculated.
How much tax do I save with salary sacrifice?
You save Income Tax at your marginal rate plus employee NI (8% or 2%) on the sacrificed amount. A 40% taxpayer sacrificing £10,000 saves £4,800 — the real cost is only £5,200 for £10,000 in pension.
Does salary sacrifice affect my mortgage application?
It can. Some lenders use your reduced contractual salary, others use pre-sacrifice income. Check with your lender before applying if you're planning to take out a mortgage.
Can I salary sacrifice my bonus into a pension?
Yes, many employers allow one-off bonus sacrifice. This is especially tax-efficient if your bonus would push you above £100,000 or into a higher band.
What is the minimum salary after sacrifice?
Your salary must not fall below the National Minimum Wage. For 2026/27, the National Living Wage for those 21+ is £12.71 per hour. Your employer should prevent any sacrifice that would breach this.
Does salary sacrifice reduce student loan repayments?
No. Student loan repayments are based on actual earnings before sacrifice, not your reduced contractual salary. HMRC uses pre-sacrifice income for student loan calculations.
How much do I save with salary sacrifice?
You save Income Tax at your marginal rate (20%, 40% or 45%) plus employee NI (8% or 2%) on every pound sacrificed. A basic rate taxpayer saves 28p per pound. A higher rate taxpayer saves 48p per pound. If you are in the £100k–£125k PA taper zone, the effective saving can exceed 60p per pound.
Does salary sacrifice affect my mortgage application?
It can. Salary sacrifice reduces your contractual salary, which is what some lenders use for affordability checks. Some mortgage providers will use your pre-sacrifice salary, but others use the reduced figure. If you are planning to apply for a mortgage in the near future, check with your lender before starting a sacrifice arrangement.
Can I salary sacrifice into a pension above £60,000?
The annual pension allowance is £60,000 for 2026/27. This includes employer contributions, your salary sacrifice and any personal contributions. If you exceed this limit, you face an annual allowance charge. However, you can carry forward unused allowance from the previous three tax years if you were a member of a pension scheme during those years.
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