Estimate the take-home pay effect and tax savings from a pension salary sacrifice arrangement. Results update instantly.
Salary sacrifice is a contractual arrangement between you and your employer. You agree to give up part of your salary in exchange for employer pension contributions of the same value. Because your gross salary is reduced, you pay less income tax and employee National Insurance on the sacrificed amount. Your employer also pays less employer NI — and many pass some or all of this saving into your pension.
Unlike relief at source or net pay, salary sacrifice is not technically "tax relief" — the benefit comes from the reduction in gross salary, meaning both income tax and NI savings are achieved simultaneously.
From April 2025, the employer NI rate is 15% on earnings above £5,000 per year. When you sacrifice £1 of salary, your employer saves 15p in NI contributions. Some employers share this saving with employees by adding it to the pension contribution. A 100% pass-through means your pension receives significantly more than the sacrifice amount.
Tom earns £50,000 and sacrifices £5,000 per year into pension. His employer passes on 50% of their NI saving.
If your salary after sacrifice falls below the Lower Earnings Limit (£6,396 in 2026/27), your National Insurance record could be affected, which may reduce your State Pension entitlement. Most employees earning a typical salary are not at risk, but it is worth checking if your post-sacrifice salary is very low.
Salary sacrifice reduces your gross salary on paper, which can affect mortgage affordability assessments. Some lenders will add the sacrifice amount back when calculating borrowing capacity — always check with your lender.
The terms depend on your employer's scheme rules. Many schemes allow changes at specific points (e.g., once per year or on a life event). Check your employment contract and scheme documentation.
Salary sacrifice contributions count towards the annual allowance as employer contributions. The £60,000 limit applies to all contributions — yours and your employer's combined. Use the Annual Allowance Checker to verify.
For a comprehensive salary sacrifice analysis including monthly pay breakdowns, auto-enrolment and comparison tools, visit:
uksalarysacrificecalculator.co.uk