Salary Sacrifice Pension Calculator
See how salary sacrifice affects your take-home pay and pension pot. Salary sacrifice saves National Insurance on top of income tax relief.
Reviewed by Richard Ross · Last updated April 2026
How Salary Sacrifice Pension Calculator works
Why salary sacrifice beats personal contributions
Both methods give income tax relief. But salary sacrifice also saves employee NI (8% within the primary-to-upper threshold range), making it more efficient. For a basic-rate taxpayer: personal contribution nets £72 per £100 sacrificed after tax/NI; salary sacrifice costs only £72 after tax and NI saving.
Employer NI saving
Employers save 15% employer NI on sacrificed salary. Enlightened employers pass some or all of this saving on to the employee's pension. Ask your employer if they share the NI saving.
Impact on benefits
Salary sacrifice reduces your contractual salary, which can affect mortgage applications (show total remuneration), state benefits based on gross pay, and maternity/paternity pay. Weigh these considerations before committing to a large sacrifice.
Annual allowance and salary sacrifice limits
Salary sacrifice contributions count towards your annual allowance alongside any other pension contributions. The annual allowance is £60,000 (or 100% of earnings if lower) for 2025-26. This includes both your sacrificed salary and any existing employer contributions. If your combined contributions exceed the allowance, you face an annual allowance charge at your marginal tax rate, which effectively cancels out any tax and NI benefit. Monitor total contributions carefully if your employer also makes significant contributions to your scheme.
Salary sacrifice and the personal allowance
Reducing your gross salary through sacrifice can have an unexpected benefit for those earning between £100,000 and £125,140: every £2 of income above £100,000 reduces the personal allowance by £1, creating an effective 60% marginal tax rate in this band. Salary sacrifice reduces adjusted net income below £100,000 and restores the full £12,570 personal allowance, making it especially valuable in this earnings range. A £25,000 sacrifice for someone earning £112,570 could save over £15,000 in income tax by restoring the full personal allowance.
Source: HMRC — Salary sacrifice for employers, GOV.UK (gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye). HMRC — Income Tax personal allowance taper (gov.uk/income-tax-rates). DWP — Auto-enrolment guidance (gov.uk).
Frequently asked questions
Is salary sacrifice worth it?
Yes for most employees. You save NI as well as income tax on contributions, reducing the net cost of pension saving. A £200/month sacrifice typically only reduces take-home pay by £144 (basic rate taxpayer) due to tax and NI savings.
Does salary sacrifice affect my mortgage?
It can. Lenders assess affordability based on your salary. A lower nominal salary from sacrifice may reduce the maximum mortgage offer. Mention total remuneration (including pension contributions) when applying for mortgages.
Can I stop salary sacrifice?
You can usually request to stop or change salary sacrifice at your employer's discretion. It is a contractual arrangement, so there may be a minimum notice period. Check your scheme rules.
Can I use salary sacrifice if I earn near the £100,000 threshold?
Yes — and it is particularly valuable. Income above £100,000 triggers a taper on the personal allowance, creating an effective 60% marginal tax rate between £100,000 and £125,140. Salary sacrifice reduces adjusted net income, potentially restoring the full £12,570 personal allowance and saving significant additional tax on top of normal relief.
Does salary sacrifice affect my auto-enrolment contributions?
Salary sacrifice is fully compatible with auto-enrolment. However, some employers base auto-enrolment contributions on your reduced (post-sacrifice) salary rather than your original salary. Check with your employer how your qualifying earnings are calculated, as this may affect the minimum employer contribution.
Does salary sacrifice affect my State Pension entitlement?
No. State Pension entitlement depends on your NI record — specifically, whether you have qualifying years above the lower earnings limit (£6,396 in 2025–26). Salary sacrifice reduces your contractual gross pay, but as long as your sacrificed salary remains above the lower earnings limit, your NI record is not affected. Employers are required to ensure salary sacrifice does not take pay below National Minimum Wage.
Can salary sacrifice affect my mortgage borrowing?
Potentially yes. Some lenders use your contractual salary (after sacrifice) rather than your gross salary before sacrifice when assessing mortgage affordability. If your sacrificed salary is significantly lower than your actual earning capacity, this could reduce the mortgage amount you can borrow. Check with your lender before entering a large salary sacrifice arrangement if you plan to remortgage or take out a new mortgage soon.
What is the maximum I can contribute via salary sacrifice?
Your pension contributions are limited by the annual allowance (£60,000 for 2025–26) and your relevant UK earnings. You cannot contribute more than your total earnings in a tax year. The annual allowance is tapered for high earners above £260,000 adjusted income, reducing to a minimum of £10,000. Within these limits, salary sacrifice contributions can be any amount your employer agrees to, subject to the scheme rules.
Does salary sacrifice work differently for higher-rate taxpayers?
The NI saving from salary sacrifice (8% employee, 15% employer) is the same regardless of income tax rate. However, the income tax saving is larger for higher-rate taxpayers: a basic-rate taxpayer saves 20p in tax per £1 sacrificed, a higher-rate taxpayer saves 40p, and an additional-rate taxpayer saves 45p. For earners in the personal allowance taper zone (£100,000–£125,140), the effective tax saving is 60p per £1 — making salary sacrifice especially valuable.
Can self-employed people use salary sacrifice?
No — salary sacrifice is only available to employees. Self-employed individuals contribute to their pension directly from profits and claim tax relief either through Self Assessment or the relief-at-source mechanism. Self-employed workers can still benefit from pension tax relief, but they cannot make employer NI savings through salary sacrifice since there is no employer-employee relationship.
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This calculator provides estimates for informational purposes only. It is not a substitute for personalised pension or financial advice. Speak to a regulated financial adviser before making pension decisions.