How Much Does Salary Sacrifice Save? UK Calculator
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.
Salary sacrifice exchanges gross pay for non-cash benefits (pension, electric car, cycle to work) before tax. It saves Income Tax (20%, 40%, or 45%) plus 8% or 2% Employee NI, and saves employers 15% Employer NI.
Your Details
11.1% of salary · £417 a month
Each £1 into your pension costs you
58p
£0 less take-home for £0 in pension
Relief ladder: what each extra £1 saves
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 £0.58 (saving 40% + 2%). 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 earnings after sacrifice, so salary sacrifice does reduce your student loan payments (by 9% of the amount sacrificed, or 6% for Postgraduate Loans). The annual pension allowance of £60,000 applies to the total amount going into your pension, including any employer contributions and the sacrificed amount.
Scotland and the April 2029 cap
Scottish taxpayers get relief at Scottish rates. Above £43,662 that is the 42% higher rate, and above £75,000 the 45% advanced rate, so with 2% NI each £1 sacrificed saves 44p or 47p. Between £100,000 and £125,140 it saves 69.5p because the Personal Allowance is also being withdrawn.
From 6 April 2029 only the first £2,000 a year of pension salary sacrifice is free of National Insurance. Above that, employee and employer NI apply, while income tax relief stays. Existing arrangements are included. Tick “Show the rules from April 2029” above to see what your sacrifice will cost then.
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: £4,730 at 40% + £1,270 at 20% = £2,146
NI saved: £4,730 at 2% + £1,270 at 8% = £196.20
Total saving: £2,342.20 | Actual take-home reduction: £3,657.80/year (£304.82/month)
Only £4,730 of the sacrifice comes off the 40% band; the other £1,270 comes off the 20% band, so the saving is less than a flat 42%. Each £1 costs about £0.61.
£1,000/month sacrifice on £100,000 salary (higher rate)
Annual sacrifice: £12,000 | Reduced salary: £88,000
At exactly £100,000 you still have your full £12,570 Personal Allowance, so there is no taper to recover and the whole sacrifice is relieved at 40%
Income Tax saved: £12,000 × 40% = £4,800
NI saved: £12,000 × 2% = £240
Total saving: £5,040 | Actual take-home reduction: £6,960/year (£580/month)
Each £1 into your pension costs £0.58 in lost take-home pay (saving 42p per pound). The saving only rises to 62p per £1 on income between £100,000 and £125,140, where the Personal Allowance is being withdrawn.
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 £4,200 — the real cost is only £5,800 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 salary 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 my student loan repayments?
Yes. Student loan repayments are 9% (6% for Postgraduate Loans) of earnings above your plan's threshold, and those earnings are measured after salary sacrifice. Sacrificing £1,000 therefore reduces a Plan 2 repayment by £90 if you are above the threshold.
Does salary sacrifice save more in Scotland?
Usually yes at the same salary. Scottish income above £43,662 is taxed at 42% and above £75,000 at 45%, so each £1 sacrificed saves 44p or 47p including 2% NI, against 42p in the rest of the UK. In the £100,000 to £125,140 taper it saves 69.5p.
What changes for salary sacrifice in April 2029?
From 6 April 2029 only the first £2,000 a year of pension salary sacrifice is free of National Insurance. Sacrifice above that still gets income tax relief but pays employee and employer NI. It applies to existing arrangements too.
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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