Salary Sacrifice Calculator UK
See what salary sacrifice really costs you — and the saving most people miss: unlike a normal pension contribution, it cuts your National Insurance too, and your employer’s.
Salary sacrifice is an arrangement where you give up part of your contractual salary in exchange for a benefit — usually a pension contribution — and because your gross pay is reduced before tax and National Insurance are worked out, you save on both. That’s the part most people miss: a standard “relief at source” pension recovers your Income Tax but not your National Insurance, whereas salary sacrifice saves both. So £1,000 into your pension costs a basic-rate employee just £720, and a higher-rate one £580 — the rest is tax and NI you’d otherwise have paid. On top of that, your employer saves 15% NI on the sacrificed amount, and many pass that straight into your pension, turning £1,000 of cost into £1,150 in your pot. It gets more powerful still near £100,000, where sacrifice restores your personal allowance and can give an effective rate of around 60%. But there are trade-offs — a lower contractual salary can affect mortgage borrowing and some benefits. This calculator shows your true cost and saving. For your headline pay, see the Salary Take-Home Calculator; for wrappers, ISA vs SIPP vs GIA.
Salary and sacrifice
Benefit and employer contribution
Tax and loans
Employer and checks
Salary sacrifice result
Monthly take-home change
Calculating…
Calculating…
Annual tax + NI saving
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Sacrifice amount
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Adjusted salary
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Employer NI saving
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Student loan saving
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Net benefit estimate
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Salary sacrifice — quick lookup
The left table shows what £1,000 in your pension actually costs you via salary sacrifice, depending on your tax band — and how that beats a standard relief-at-source pension. The right lists the rates that drive the saving. The headline is in the left table: sacrifice saves National Insurance that an ordinary pension contribution never touches.
| Your band | Sacrifice | Relief at source |
|---|---|---|
| Basic rate | £720 | £800 |
| Higher rate | £580 | £600 |
| Additional rate | £530 | £550 |
| £100k–£125k | £380 | £400 |
| Item | Rate |
|---|---|
| Employee NI (to £50,270) | 8% |
| Employee NI (above) | 2% |
| Employer NI | 15% |
| Income Tax bands | 20/40/45% |
| Lower Earnings Limit | £6,396 |
“Sacrifice” cost is £1,000 less the Income Tax and employee NI you’d have paid: basic rate saves 20% + 8% (cost £720); higher rate 40% + 2% (cost £580). “Relief at source” recovers Income Tax only, not NI, so it always costs more. The £100k–£125k row reflects the personal allowance being restored, giving an effective ~62% saving. If your employer passes on their 15% NI saving, your pension gets even more for the same cost.
How salary sacrifice works
The idea is simple, but the reason it beats an ordinary pension contribution is subtle — and it comes down to National Insurance. Once you see where NI fits, the whole thing clicks.
You swap salary for a benefit, before tax
Salary sacrifice (sometimes called “salary exchange”) is a contractual reduction in your gross pay in return for a benefit your employer provides — most often a pension contribution, but also electric car leases or cycle-to-work schemes. Because your contractual salary is lower, PAYE runs on the reduced figure, so you pay less Income Tax and less National Insurance. The employer then pays the sacrificed amount into your pension as an employer contribution.
The key difference: it saves National Insurance
This is the part most people miss. A normal “relief at source” pension — the default for most workplace and personal pensions — recovers your Income Tax but does nothing about National Insurance. Salary sacrifice saves both. For a basic-rate employee, £1,000 in the pension costs £800 via relief at source but only £720 via sacrifice — the £80 difference is the employee NI you keep. It’s not a huge gap per pound, but it’s free, it compounds over a career, and it requires no extra spending.
The employer’s 15% — the bit worth asking about
When you sacrifice salary, your employer also stops paying 15% NI on that amount. Many employers pass some or all of that saving straight into your pension. On £1,000 sacrificed, that’s up to £150 extra in your pot — turning £1,000 of contributions into £1,150, at no extra cost to you. Not every employer does this, so it’s always worth asking. It’s the single biggest reason salary sacrifice can beat every other route into a pension.
Worked examples
Four scenarios showing the real cost, the relief-at-source comparison, the employer top-up, and the £100k effect.
Scenario 1 · Basic-rate employee
£1,000 in, £720 out of pocket
Saves 20% Income Tax + 8% employee NI = £280
Real cost to take-home: £720
A basic-rate employee sacrificing £1,000 sees their take-home fall by just £720, because the £280 of Income Tax and National Insurance they’d have paid never leaves their pay. The full £1,000 lands in their pension. Through a relief-at-source pension the same £1,000 would cost £800 — the £80 gap is the NI that only sacrifice saves. Small per contribution, but real and automatic.
Scenario 2 · Higher-rate employee
£1,000 in, £580 out of pocket
Saves 40% Income Tax + 2% employee NI = £420
Real cost to take-home: £580
A higher-rate employee saves even more on Income Tax — 40% — though their NI rate above £50,270 drops to 2%. The £1,000 contribution costs them £580. Crucially, sacrifice gives the 40% relief automatically, whereas a relief-at-source pension only adds basic-rate relief upfront and makes you claim the rest back through Self Assessment. Sacrifice is both cheaper and simpler for higher earners.
Scenario 3 · Employer passes on its NI saving
£1,000 cost becomes £1,150 in the pot
Employer adds the £150 to the pension
Pension gets £1,150 for the same personal cost
Where an employer passes on its 15% NI saving, the maths gets genuinely compelling. The same sacrifice that costs a basic-rate employee £720 now puts £1,150 into their pension instead of £1,000 — a £430 gain on a £720 outlay before any investment growth. Not all employers do this, but many will if asked, because it costs them nothing. It’s the question that turns a good deal into a great one.
Scenario 4 · Earning just over £100,000
The 60% effective saving
Restores personal allowance + 40% relief + 2% NI
Effective saving ~62% · real cost roughly £1,900
Between £100,000 and £125,140, every £2 of income costs you £1 of personal allowance, creating an effective 60% Income Tax rate. Sacrificing salary back below £100,000 restores that allowance, so each pound sacrificed effectively saves about 60% Income Tax plus 2% NI. £5,000 into the pension can cost under £2,000 of take-home. This is why high earners near the £100k cliff treat salary sacrifice as one of the most valuable moves available.
Is salary sacrifice worth it? Four questions
Most guides sell the upside and stop. But whether sacrifice is right for you depends on four things — and a couple of them are genuine downsides worth knowing before you sign. Work through these:
-
1
Does your employer pass on its NI saving?
This is the question that changes everything. If your employer adds its 15% NI saving to your pension, sacrifice beats every other route comfortably. If it keeps the saving, you still gain your own NI, but the edge is smaller. Always ask — many employers will pass it on because it costs them nothing.
-
2
Are you near £100,000 or the Child Benefit charge?
Sacrifice lowers your adjusted net income, which can restore the personal allowance above £100,000 (a ~60% effective saving) and pull you under the High Income Child Benefit Charge threshold. For high earners and parents, this is where the real money is — far beyond the headline NI saving.
-
3
Are you about to apply for a mortgage?
Sacrifice lowers your contractual salary, which some lenders use for affordability. Many now accept the pre-sacrifice figure, but not all. If you’re applying soon, check with a broker first — you may want to time the arrangement around the application rather than reduce your borrowing power.
-
4
Would it push your pay too low?
Sacrifice can’t take you below the National Minimum Wage, and dropping below the Lower Earnings Limit (£6,396) risks losing National Insurance credits toward your State Pension. It can also reduce salary-linked benefits like maternity pay and life cover. For lower or part-time earners, check these floors first.
£1,000 into a pension — same goal, four routes
What it costs a basic-rate employee:
For the same £1,000 in your pension, salary sacrifice with an employer top-up can cost £720 and deliver £1,150, while a relief-at-source pension costs £800 and delivers £1,000. That gap — cheaper in, and potentially more in — is why sacrifice is so often the best route. The verdict is usually yes for steady earners well above the minimum wage, and emphatically yes near the £100k cliff or the Child Benefit charge. It deserves more caution if you’re applying for a mortgage soon, rely on salary-linked benefits, or earn near the minimum wage. The calculator shows your real cost for your salary and contribution.
A note on the 2029 change
The rules are at their most generous right now. The government has announced that, from April 2029, the National Insurance relief on salary-sacrificed pension contributions will be capped at £2,000 a year — contributions above that will attract employee and employer NI, though Income Tax relief is unchanged. It doesn’t affect the position today, but it’s a reason many see the current arrangement as a window worth using while it lasts.
Two scenarios that change the picture
What if…
Your employer passes on its NI saving?
What if…
You’re a parent earning just over £60,000?
Salary sacrifice — quick lookup
The left table shows what £1,000 in your pension actually costs you via salary sacrifice, depending on your tax band — and how that beats a standard relief-at-source pension. The right lists the rates that drive the saving. The headline is in the left table: sacrifice saves National Insurance that an ordinary pension contribution never touches.
| Your band | Sacrifice | Relief at source |
|---|---|---|
| Basic rate | £720 | £800 |
| Higher rate | £580 | £600 |
| Additional rate | £530 | £550 |
| £100k–£125k | £380 | £400 |
| Item | Rate |
|---|---|
| Employee NI (to £50,270) | 8% |
| Employee NI (above) | 2% |
| Employer NI | 15% |
| Income Tax bands | 20/40/45% |
| Lower Earnings Limit | £6,396 |
“Sacrifice” cost is £1,000 less the Income Tax and employee NI you’d have paid: basic rate saves 20% + 8% (cost £720); higher rate 40% + 2% (cost £580). “Relief at source” recovers Income Tax only, not NI, so it always costs more. The £100k–£125k row reflects the personal allowance being restored, giving an effective ~62% saving. If your employer passes on their 15% NI saving, your pension gets even more for the same cost.
How salary sacrifice works
The idea is simple, but the reason it beats an ordinary pension contribution is subtle — and it comes down to National Insurance. Once you see where NI fits, the whole thing clicks.
You swap salary for a benefit, before tax
Salary sacrifice (sometimes called “salary exchange”) is a contractual reduction in your gross pay in return for a benefit your employer provides — most often a pension contribution, but also electric car leases or cycle-to-work schemes. Because your contractual salary is lower, PAYE runs on the reduced figure, so you pay less Income Tax and less National Insurance. The employer then pays the sacrificed amount into your pension as an employer contribution.
The key difference: it saves National Insurance
This is the part most people miss. A normal “relief at source” pension — the default for most workplace and personal pensions — recovers your Income Tax but does nothing about National Insurance. Salary sacrifice saves both. For a basic-rate employee, £1,000 in the pension costs £800 via relief at source but only £720 via sacrifice — the £80 difference is the employee NI you keep. It’s not a huge gap per pound, but it’s free, it compounds over a career, and it requires no extra spending.
The employer’s 15% — the bit worth asking about
When you sacrifice salary, your employer also stops paying 15% NI on that amount. Many employers pass some or all of that saving straight into your pension. On £1,000 sacrificed, that’s up to £150 extra in your pot — turning £1,000 of contributions into £1,150, at no extra cost to you. Not every employer does this, so it’s always worth asking. It’s the single biggest reason salary sacrifice can beat every other route into a pension.
Worked examples
Four scenarios showing the real cost, the relief-at-source comparison, the employer top-up, and the £100k effect.
Scenario 1 · Basic-rate employee
£1,000 in, £720 out of pocket
Saves 20% Income Tax + 8% employee NI = £280
Real cost to take-home: £720
A basic-rate employee sacrificing £1,000 sees their take-home fall by just £720, because the £280 of Income Tax and National Insurance they’d have paid never leaves their pay. The full £1,000 lands in their pension. Through a relief-at-source pension the same £1,000 would cost £800 — the £80 gap is the NI that only sacrifice saves. Small per contribution, but real and automatic.
Scenario 2 · Higher-rate employee
£1,000 in, £580 out of pocket
Saves 40% Income Tax + 2% employee NI = £420
Real cost to take-home: £580
A higher-rate employee saves even more on Income Tax — 40% — though their NI rate above £50,270 drops to 2%. The £1,000 contribution costs them £580. Crucially, sacrifice gives the 40% relief automatically, whereas a relief-at-source pension only adds basic-rate relief upfront and makes you claim the rest back through Self Assessment. Sacrifice is both cheaper and simpler for higher earners.
Scenario 3 · Employer passes on its NI saving
£1,000 cost becomes £1,150 in the pot
Employer adds the £150 to the pension
Pension gets £1,150 for the same personal cost
Where an employer passes on its 15% NI saving, the maths gets genuinely compelling. The same sacrifice that costs a basic-rate employee £720 now puts £1,150 into their pension instead of £1,000 — a £430 gain on a £720 outlay before any investment growth. Not all employers do this, but many will if asked, because it costs them nothing. It’s the question that turns a good deal into a great one.
Scenario 4 · Earning just over £100,000
The 60% effective saving
Restores personal allowance + 40% relief + 2% NI
Effective saving ~62% · real cost roughly £1,900
Between £100,000 and £125,140, every £2 of income costs you £1 of personal allowance, creating an effective 60% Income Tax rate. Sacrificing salary back below £100,000 restores that allowance, so each pound sacrificed effectively saves about 60% Income Tax plus 2% NI. £5,000 into the pension can cost under £2,000 of take-home. This is why high earners near the £100k cliff treat salary sacrifice as one of the most valuable moves available.
Is salary sacrifice worth it? Four questions
Most guides sell the upside and stop. But whether sacrifice is right for you depends on four things — and a couple of them are genuine downsides worth knowing before you sign. Work through these:
-
1
Does your employer pass on its NI saving?
This is the question that changes everything. If your employer adds its 15% NI saving to your pension, sacrifice beats every other route comfortably. If it keeps the saving, you still gain your own NI, but the edge is smaller. Always ask — many employers will pass it on because it costs them nothing.
-
2
Are you near £100,000 or the Child Benefit charge?
Sacrifice lowers your adjusted net income, which can restore the personal allowance above £100,000 (a ~60% effective saving) and pull you under the High Income Child Benefit Charge threshold. For high earners and parents, this is where the real money is — far beyond the headline NI saving.
-
3
Are you about to apply for a mortgage?
Sacrifice lowers your contractual salary, which some lenders use for affordability. Many now accept the pre-sacrifice figure, but not all. If you’re applying soon, check with a broker first — you may want to time the arrangement around the application rather than reduce your borrowing power.
-
4
Would it push your pay too low?
Sacrifice can’t take you below the National Minimum Wage, and dropping below the Lower Earnings Limit (£6,396) risks losing National Insurance credits toward your State Pension. It can also reduce salary-linked benefits like maternity pay and life cover. For lower or part-time earners, check these floors first.
£1,000 into a pension — same goal, four routes
What it costs a basic-rate employee:
For the same £1,000 in your pension, salary sacrifice with an employer top-up can cost £720 and deliver £1,150, while a relief-at-source pension costs £800 and delivers £1,000. That gap — cheaper in, and potentially more in — is why sacrifice is so often the best route. The verdict is usually yes for steady earners well above the minimum wage, and emphatically yes near the £100k cliff or the Child Benefit charge. It deserves more caution if you’re applying for a mortgage soon, rely on salary-linked benefits, or earn near the minimum wage. The calculator shows your real cost for your salary and contribution.
A note on the 2029 change
The rules are at their most generous right now. The government has announced that, from April 2029, the National Insurance relief on salary-sacrificed pension contributions will be capped at £2,000 a year — contributions above that will attract employee and employer NI, though Income Tax relief is unchanged. It doesn’t affect the position today, but it’s a reason many see the current arrangement as a window worth using while it lasts.
Two scenarios that change the picture
What if…
Your employer passes on its NI saving?
What if…
You’re a parent earning just over £60,000?
Frequently asked questions
How does salary sacrifice work?
You agree to give up part of your contractual salary in return for a benefit — usually an employer pension contribution. Because your gross pay is reduced before tax and National Insurance are calculated, you pay less of both, and the sacrificed amount goes into your pension.
So £1,000 sacrificed costs a basic-rate employee about £720 of take-home and a higher-rate one £580 — the difference being the Income Tax and NI you’d otherwise have paid. The full £1,000 still lands in your pension.
Why is salary sacrifice better than a normal pension contribution?
Because it saves National Insurance as well as Income Tax. A standard “relief at source” pension recovers your Income Tax but does nothing about NI. Salary sacrifice saves both, so the same £1,000 costs less.
It’s also simpler for higher earners: sacrifice gives full 40% or 45% relief automatically, whereas relief at source only adds basic-rate relief upfront and makes you claim the rest through Self Assessment. And if your employer passes on its 15% NI saving, your pension gets even more.
How much does salary sacrifice save me?
On each £1 sacrificed you save your Income Tax rate plus employee NI: 20% + 8% for a basic-rate employee (so £1 costs 72p), or 40% + 2% for a higher-rate one (58p). On £1,000, that’s £280 or £420 saved.
The saving is larger near £100,000, where sacrifice restores your personal allowance for an effective ~60% Income Tax saving, and for parents it can also recover Child Benefit. If your employer adds its 15% NI saving, your pension grows further still.
Does my employer save money too?
Yes. Your employer stops paying 15% National Insurance on the sacrificed amount. On £1,000 sacrificed, that’s £150 they save.
Many employers pass some or all of that saving into your pension, turning £1,000 of contributions into up to £1,150 at no extra cost to you. Not all do, so it’s always worth asking your payroll or HR team — it’s often cost-neutral for the employer to say yes.
Will salary sacrifice affect my mortgage?
It can. Sacrifice lowers your contractual salary, and some lenders use that figure for affordability checks, which could reduce how much you can borrow.
However, many major lenders now accept the pre-sacrifice (reference) salary. If you’re applying for a mortgage soon, check with a broker first, and consider timing your sacrifice arrangement around the application. For the borrowing side, see our Mortgage Affordability Calculator.
Can salary sacrifice reduce my pay too much?
Yes, there are floors. Sacrifice cannot take your pay below the National Minimum Wage, and if it drops you below the Lower Earnings Limit (£6,396) you may stop building National Insurance credits toward your State Pension.
It can also reduce salary-linked benefits such as statutory maternity pay, sick pay, and life cover, which are often based on your reduced salary. For lower or part-time earners, check these limits before sacrificing a large amount.
Is salary sacrifice good for high earners near £100,000?
It’s one of the most valuable moves available to them. Between £100,000 and £125,140, your personal allowance is withdrawn at £1 for every £2 earned, creating an effective 60% Income Tax rate on income in that band.
Sacrificing salary back below £100,000 restores the allowance, so each pound effectively saves around 60% Income Tax plus 2% NI. £5,000 into a pension can cost under £2,000 of take-home. Many high earners use sacrifice specifically to escape this cliff.
Is salary sacrifice changing in 2029?
Yes. The government has announced that from April 2029, the National Insurance relief on salary-sacrificed pension contributions will be capped at £2,000 a year. Contributions above that will attract employee and employer NI, although Income Tax relief is unchanged.
It doesn’t affect the position today, where the full NI saving applies. Many see the current arrangement as a window worth using while it lasts, especially for larger contributions. See gov.uk for the current rules.
Related calculators
Salary sacrifice connects to your headline pay, your pension and wrappers, and the borrowing it can affect. These calculators handle each piece.
Methodology & sources
How the maths works
The calculator reduces your gross salary by the sacrificed amount, then compares the tax and National Insurance before and after. The saving on the sacrificed amount is your Income Tax rate plus your employee NI rate at that level of earnings: 20% Income Tax and 8% NI in the basic-rate band (a 28% saving), 40% and 2% in the higher band (42%), and 45% and 2% in the additional band. So the cost to your take-home is the sacrificed amount less that saving. Where earnings fall between £100,000 and £125,140, sacrifice also restores the tapered personal allowance, lifting the effective Income Tax saving to around 60%. If the employer passes on its 15% secondary NI saving, that is added to the pension, increasing what lands in your pot for the same personal cost. A relief-at-source pension is shown for comparison: it recovers Income Tax but not NI, so it always costs more for the same contribution.
These are illustrative estimates to show how salary sacrifice behaves, not a personal tax computation. Real outcomes depend on your exact salary, your tax band, whether Scottish income tax applies, your existing pension and other deductions, whether your employer passes on its NI saving, and the current rates and thresholds, all of which can change. Sacrifice can affect mortgage affordability, the National Minimum Wage floor, State Pension credits, and salary-linked benefits. The aim is to show your real cost and saving, and the trade-offs — not to replace tailored financial advice.
Assumptions and conventions used
- Income Tax: 20% / 40% / 45% by band, on the reduced salary
- Employee NI: 8% to £50,270, 2% above
- Employer NI: 15% above the £5,000 secondary threshold
- Basic-rate cost: £1 sacrificed costs 72p of take-home
- Higher-rate cost: £1 sacrificed costs 58p of take-home
- £100k–£125,140: personal allowance restored, ~60% effective relief
- Relief at source recovers Income Tax only, not NI
- Floors: National Minimum Wage and Lower Earnings Limit £6,396
- Rates and thresholds shown are illustrative current UK figures