Salary Sacrifice Calculator UK 2025–26
See exactly how much income tax and National Insurance you save by making pension contributions through salary sacrifice. Enter your salary and sacrifice amount to calculate your annual saving.
How salary sacrifice works
Salary sacrifice is a contractual arrangement between you and your employer. You agree to give up part of your cash salary and in return your employer pays that amount directly into your pension. Because the exchange happens before tax and National Insurance are calculated, you effectively get tax and NI relief at your marginal rate — rather than waiting to claim it back.
The tax and NI saving
For every £1,000 you sacrifice, the saving depends on your income tax band:
- Basic rate taxpayer: Save £200 income tax + £80 employee NI = £280 total. The £1,000 pension contribution only costs £720 from take-home pay.
- Higher rate taxpayer: Save £400 income tax + £20 employee NI = £420 total. The effective cost is £580.
- Additional rate taxpayer (income over £125,140): Save £450 income tax + £20 NI = £470 total. Effective cost £530.
Additionally, your employer saves employer NI (15% in 2025–26) on the sacrificed amount. Many forward-thinking employers pass part or all of this saving on to employees as an extra pension contribution.
Salary sacrifice vs relief at source
Most personal pensions and SIPPs use relief at source. You contribute from net pay, and the provider claims 20% basic rate tax relief from HMRC, topping up your contribution. Higher rate taxpayers can claim additional relief via Self Assessment. However, relief at source does not save National Insurance — only salary sacrifice does. For a basic rate taxpayer with employee NI at 8%, salary sacrifice saves 28p per £1 versus 20p per £1 under relief at source.
Considerations
Salary sacrifice is not available for everyone. It requires your employer to run the scheme. Some workplace pensions operate on a net pay basis rather than salary sacrifice — these still save income tax but not NI. Check with your HR or payroll team to confirm how your workplace pension operates.
If salary sacrifice reduces your pay below the National Minimum Wage, your employer is legally required to maintain your gross pay at the minimum wage level, which limits the amount you can sacrifice. At most salary levels, this is not a constraint.
Frequently asked questions
What is salary sacrifice and how does it work?
Salary sacrifice (sometimes called salary exchange) is an arrangement where you agree to give up part of your gross salary in exchange for a non-cash benefit from your employer — most commonly pension contributions. Because the sacrifice reduces your gross pay before income tax and National Insurance are calculated, you pay less of both. The pension contribution goes straight into your pension as an employer contribution.
What is the difference between salary sacrifice and relief at source?
With salary sacrifice, your gross pay is reduced before tax and NI are calculated — so you save both income tax and employee NI. With relief at source (the most common personal pension arrangement), you contribute from your net pay and the pension provider claims basic rate tax relief from HMRC. Higher and additional rate taxpayers can claim extra relief via Self Assessment. Relief at source does not save NI. Salary sacrifice is generally more efficient for most employees, but requires your employer to operate the scheme.
Does salary sacrifice affect my state pension?
If salary sacrifice reduces your earnings below the Lower Earnings Limit (£6,396 in 2025-26), it could affect your National Insurance record and therefore your state pension entitlement. At higher salary levels this is not a concern. Some employers maintain a notional salary for state benefit purposes at the original salary level — check with your HR department.
Can my employer share their NI saving with me?
Yes. When you sacrifice salary, your employer also saves employer NI (15% of the sacrificed amount in 2025-26). Many employers pass some or all of this saving back to the employee as an additional pension contribution — often 50% or 100% of the employer NI saving. This is sometimes called an NI rebate scheme. It significantly increases the value of salary sacrifice, particularly for higher earners.
Is there a limit on how much I can sacrifice?
There is no statutory limit on the amount you can sacrifice, but your salary cannot fall below the National Minimum Wage as a result. There is also the pension annual allowance (£60,000 in 2025-26, or 100% of earnings if lower) which limits total pension contributions across all sources. Contributions above the annual allowance trigger an annual allowance charge. For very high earners, the tapered annual allowance may further reduce the limit.
Related calculators
This calculator provides estimates only. Results are based on the 2025–26 tax year. Credibrate is not a tax adviser. For personalised advice speak to a qualified accountant.