Salary Sacrifice Pension Calculator
2026-27 tax year · England, Wales & Northern Ireland
For comparison — personal contributions don't save NI
What is salary sacrifice?
Salary sacrifice is an arrangement where you give up part of your gross salary in exchange for a non-cash benefit — most commonly pension contributions. Instead of receiving the money as pay and then contributing to your pension from your net pay, the contribution is made before your pay is calculated.
This matters because income tax and National Insurance are calculated on your reduced salary, meaning you pay less of both. A personal pension contribution only gets income tax relief — you still pay NI on the full amount before contributing.
How much do you actually save?
The saving depends on your income tax band. A basic rate taxpayer contributing £1,000 via salary sacrifice saves 20% income tax (£200) plus 8% NI (£80) — a total of £280 per £1,000 contributed. The same contribution made personally only saves 20% tax via relief — just £200.
For a higher rate taxpayer, the saving is even larger: 40% income tax plus 2% NI above the upper earnings limit, or 8% if below it. On a £60,000 salary with contributions in the higher rate band, salary sacrifice can save over 40p for every £1 contributed.
The trap between £100,000 and £125,140
If your salary is between £100,000 and £125,140, salary sacrifice is especially powerful. In this range you face an effective 60% marginal rate because your Personal Allowance is being withdrawn (£1 lost for every £2 earned above £100,000). Salary sacrifice reduces your adjusted net income, potentially restoring Personal Allowance and reducing your effective rate dramatically.
For example, if you earn £110,000 and sacrifice enough to bring adjusted net income to £100,000, you can recover up to £5,000 of Personal Allowance — worth £2,000 in income tax alone, on top of the NI saving.
Does employer NI also get saved?
Yes — your employer also saves National Insurance on salary you sacrifice (13.8% employer NI in 2026-27). Some employers pass this saving on to employees as an enhanced pension contribution. It is worth asking your employer whether they do this — if they add even half their NI saving to your pension, the total benefit increases substantially.
Frequently asked questions
Does salary sacrifice affect my state pension?
Potentially yes. State pension entitlement is based on National Insurance contribution records. If salary sacrifice reduces your earnings below the National Insurance lower earnings limit (£6,396 in 2026-27), you may not accumulate a qualifying year. At typical UK salaries this is not a concern, but it is worth checking if your salary is low or you work part-time.
Does salary sacrifice affect mortgage applications?
It can. Mortgage lenders typically assess affordability based on your gross salary. If your employment contract shows a reduced gross salary due to salary sacrifice, some lenders may use that lower figure. Check with your employer what figure appears on your payslips and contract, and raise this with your mortgage broker.
Can I change my salary sacrifice percentage?
This depends on your employer's scheme rules. Most employers allow changes at certain points in the year (typically annually or quarterly). Some allow monthly changes. Check with your HR or payroll team.
Is there a limit on salary sacrifice?
Your salary after sacrifice cannot fall below the National Living Wage. The annual pension allowance for 2026-27 is £60,000 (including employer contributions), though most employees are well below this. High earners may face a tapered annual allowance if adjusted income exceeds £260,000.