Salary Sacrifice Pension Calculator
See how much income tax and National Insurance you save by sacrificing salary into your pension in 2026/27 — and what it really costs your take-home pay.
Last updated 2 July 2026 · Written and reviewed by Mustafa Bilgic
Salary sacrifice calculator
2026/27 tax and NI bands, employer NI at 15%.
Estimate only — figures use the latest published UK rates. Always confirm on GOV.UK.
How salary sacrifice works
Salary sacrifice (sometimes called salary exchange) is an agreement to give up part of your gross salary in return for your employer paying that amount straight into your workplace pension. Because the sacrificed pay never reaches your payslip as salary, it escapes both income tax and employee National Insurance. In 2026/27 that means a basic-rate taxpayer saves 20% tax plus 8% NI on every pound exchanged — so the money lands in your pension having cost noticeably less than its face value. Your employer saves too: they pay 15% employer NI on salary above £5,000, so every pound you sacrifice saves them 15p.
On a £40,000 salary, sacrificing £3,000 into your pension saves £600 income tax and £240 employee NI, so your take-home pay drops by only £2,160 — each £1 in your pension costs about 72p. Your employer also saves £450 in NI (15%), which some employers add to your pot as well.
Why it beats a normal pension contribution
An ordinary personal contribution into a workplace scheme gets income tax relief, but you still pay National Insurance on the money first. Salary sacrifice removes the NI layer as well: 8% for earnings between £12,570 and £50,270, and 2% above that. That NI saving is exactly why the same pension contribution leaves more in your pocket when it is sacrificed. You can compare the two routes side by side with our pension contribution calculator, and see your full payslip effect in the take-home pay calculator.
What a £3,000 sacrifice costs at different salaries (2026/27)
| Salary | Income tax saved | Employee NI saved | Take-home cost | Cost per £1 |
|---|---|---|---|---|
| £30,000 | £600 | £240 | £2,160 | 72p |
| £60,000 | £1,200 | £60 | £1,740 | 58p |
| £110,000 | £1,800 | £60 | £1,140 | 38p |
| £130,000 | £1,350 | £60 | £1,590 | 53p |
The £110,000 row is not a typo: between £100,000 and £125,140 the personal allowance is withdrawn at £1 for every £2 earned, so sacrificing salary in that band claws allowance back and each £1 into the pension costs just 38p of take-home pay. Rates and bands are on GOV.UK; our National Insurance calculator shows the NI side on its own.
The employer's 15% — and who keeps it
Employer NI is 15% on pay above £5,000 in 2026/27, so a £3,000 sacrifice saves your employer £450 every year. Practice varies widely: some employers pass all of that saving into your pension, some share part of it, and some keep it to cover scheme costs. It is always worth asking, because full pass-through turns a £3,000 sacrifice into £3,450 invested — tick the box in the calculator to see the difference.
Watch-outs before you sign
Salary sacrifice is a contractual pay cut, and that has side effects. Your pay cannot fall below the National Minimum Wage after the sacrifice — £12.71 an hour for those aged 21 and over from April 2026 — which limits how much lower earners can exchange. A lower contractual salary can also feed into mortgage affordability checks, statutory pay calculations and salary-linked benefits such as life cover multiples, although some employers base these on a notional pre-sacrifice figure. Check how your employer handles each before committing.
The April 2029 change: a £2,000 NI cap
At Autumn Budget 2025 the government announced that from April 2029 only the first £2,000 a year of salary-sacrificed pension contributions will remain exempt from National Insurance — amounts above that will have NI applied. Sacrifices of £2,000 or less are unaffected, but if you exchange more than that, the NI advantage on the excess will shrink from April 2029. Until then the current rules apply in full, which is one reason larger sacrifices are especially attractive in 2026/27.
Frequently asked questions
How much does salary sacrifice actually cost me?
For a basic-rate taxpayer in 2026/27, each £1 sacrificed into a pension saves 20p income tax and 8p employee National Insurance, so £1 in your pension costs about 72p of take-home pay. On a £40,000 salary, sacrificing £3,000 reduces take-home pay by just £2,160.
Does my employer save money too?
Yes. Employers pay 15% National Insurance on pay above £5,000, so they save 15% on every pound you sacrifice — £450 on a £3,000 sacrifice. Some employers pass some or all of this saving into your pension, while others keep it, so ask what your scheme does.
Can everyone use salary sacrifice?
No. Your employer has to offer it, and your contractual pay cannot fall below the National Minimum Wage after the sacrifice — £12.71 an hour for those aged 21 and over from April 2026. That caps how much lower-paid workers can sacrifice.
Is salary sacrifice being restricted?
Yes, from April 2029. As announced at Autumn Budget 2025, only the first £2,000 a year of salary-sacrificed pension contributions will stay exempt from National Insurance — amounts above that will have NI applied, so very large sacrifices will lose part of their current advantage.
Does salary sacrifice affect my mortgage or statutory pay?
It can. Salary sacrifice legally reduces your gross salary, which is the figure mortgage lenders, statutory pay calculations and salary-linked benefits such as life cover multiples are usually based on. Some employers use a notional pre-sacrifice salary for these — check before committing.