Salary Sacrifice Calculator UK 2026-27
Calculate how much income tax and National Insurance you save by making pension contributions through salary sacrifice in 2026–27. Enter your salary and sacrifice amount to see the exact saving at your marginal rate — including NI savings that relief-at-source pensions cannot offer.
Rates correct for 2026–27 · Reviewed by the Richard Ross · Last updated April 2026
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 income 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 2026–27) on the sacrificed amount. Many forward-thinking employers pass part or all of this saving on to employees as an extra pension contribution.
Worked example: £50,000 salary with £5,000 sacrifice
Salary sacrifice saving (England/Wales, 2026–27):
Without sacrifice (£50,000):
- Income tax: £7,486
- Employee NI: £2,994.40
- Take-home: £39,519.60
With sacrifice (£45,000):
- Income tax: £6,486
- Employee NI: £2,594.40
- Take-home: £35,919.60
Your take-home drops by: £3,600
Your pension receives: £5,000
Tax + NI saved: £1,000 income tax + £400 NI = £1,400
The £5,000 pension contribution effectively costs you only £3,600 in take-home pay. Use the take-home pay calculator to see the full impact on your net pay.
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.
The 60% tax trap and salary sacrifice
If your income is between £100,000 and £125,140, you lose £1 of personal allowance for every £2 of income above £100,000 — creating an effective 60% marginal rate in this band. Salary sacrifice is one of the most powerful tools to avoid this trap. By sacrificing enough salary to bring your adjusted net income below £100,000, you restore your full personal allowance (£12,570). A £10,000 sacrifice in this zone saves £6,000 in tax that would otherwise be lost to the taper, in addition to the NI saving.
Sacrificing a bonus
Many employers allow you to sacrifice part or all of a bonus into your pension via salary sacrifice. This is particularly effective when a bonus pushes your income across a tax band threshold or into the personal allowance taper zone. A £10,000 bonus sacrificed by a higher rate taxpayer saves £4,000 in income tax and £200 in employee NI — and the employer saves £1,380 in employer NI too.
Considerations and limitations
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. There is also the pension annual allowance (£60,000 in 2026–27, or 100% of earnings if lower) which caps total pension contributions. Contractors should also consider their IR35 status — salary sacrifice is only available to employees, not self-employed contractors.
Sources: HMRC — Income Tax rates and allowances (gov.uk), HMRC — National Insurance rates (gov.uk)
Further reading
Since April 2025, employer NI is 15% on every pound of salary above £5,000 — which makes pension, cycle-to-work, and EV salary sacrifice schemes materially more valuable to both employers and employees.
How the £5,000 employer NI threshold changed the maths →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.
How much do I save with salary sacrifice on a £50,000 salary?
If you earn £50,000 and sacrifice £5,000 into a pension, your taxable salary falls to £45,000. You save £1,000 in income tax (20% of £5,000) and £400 in employee NI (8% of £5,000) — a total saving of £1,400. The £5,000 reaches your pension in full, but your take-home pay only drops by £3,600. If your employer passes on their 15% NI saving (£750), an extra £750 goes into your pension too.
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 reduce my National Insurance?
Yes — this is one of the main advantages of salary sacrifice over other pension contribution methods. Because your gross salary is reduced before NI is calculated, you save employee NI at 8% (on earnings between £12,570 and £50,270) or 2% (on earnings above £50,270). Relief at source pensions do not save NI. For a basic rate taxpayer sacrificing £5,000, the NI saving alone is £400.
Does salary sacrifice affect my state pension?
If salary sacrifice reduces your earnings below the Lower Earnings Limit (£6,396 in 2026-27), 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 2026-27 on earnings above the secondary threshold). 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 2026-27, 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.
Can salary sacrifice help me avoid the 60% tax trap?
Yes — salary sacrifice is one of the most effective ways to mitigate the personal allowance taper between £100,000 and £125,140. If your total income is in this range, sacrificing enough salary to bring your adjusted net income below £100,000 restores your full personal allowance (£12,570) and avoids the effective 60% marginal rate. A £10,000 sacrifice in this zone saves £6,000 in tax that would otherwise be lost to the taper.
Does salary sacrifice affect my mortgage application?
It can. Most mortgage lenders assess affordability based on your gross salary. If salary sacrifice reduces your contractual gross pay, some lenders may use the lower figure — potentially reducing your maximum borrowing. However, many lenders recognise salary sacrifice and use your pre-sacrifice salary or total compensation. Check with your lender or broker before committing to a large sacrifice arrangement.
Can I sacrifice my bonus into a pension?
Yes — many employers allow you to sacrifice some or all of a bonus into your pension via a one-off salary sacrifice arrangement. This is particularly tax-efficient for bonuses that push your income above a tax band threshold or into the personal allowance taper zone. The entire bonus reaches your pension without income tax or NI being deducted, and your employer saves their NI too.
Related calculators
This calculator provides estimates only. Results are based on the 2026–27 tax year. Credibrate is not a tax adviser. For personalised advice speak to a qualified accountant.