Salary Sacrifice Pension Calculator 2026/27
Enter your salary and sacrifice amount to see your income tax saving, employee NI saving, employer NI saving and total pension value.
How salary sacrifice works
Salary sacrifice is a contractual arrangement between you and your employer. You give up part of your salary in exchange for employer pension contributions of the same value. Your gross salary is lower, so you pay less income tax and employee NI. Your employer also saves employer NI, and many pass some or all of that saving into your pension.
Unlike relief at source or net pay, salary sacrifice is not technically "tax relief". The saving comes from the reduced gross salary, so income tax and NI savings happen at the same time.
What the employer NI saving means for you
From April 2025, the employer NI rate is 15% on earnings above £5,000 per year. Sacrifice £1 of salary and your employer saves 15p in NI. Some employers add that saving to your pension. A 100% pass-through means your pension receives significantly more than the sacrifice amount alone.
Worked example
Tom earns £50,000 and sacrifices £5,000 per year into pension. His employer passes on 50% of their NI saving.
- Income tax saving: approximately £1,000 (20% on £5,000)
- Employee NI saving: approximately £400 (8% on most of the £5,000)
- Employer NI saving: £750 (15% × £5,000)
- 50% passed on: £375 extra pension
- Total pension value: £5,375
- Net monthly cost to take-home: approximately £300/month
Salary sacrifice vs relief at source: which saves more?
Both methods save income tax at your marginal rate. Salary sacrifice also saves employee NI. Relief at source does not. A basic-rate taxpayer sacrificing £5,000 in the main NI band (£12,570–£50,270) saves 28% combined (20% tax + 8% NI), versus 20% under relief at source. A higher-rate taxpayer above £50,270 saves 42% (40% tax + 2% NI), versus 40% under relief at source.
And there is another difference. Salary sacrifice counts as an employer contribution, not a personal one. That means it does not eat into the 100% earnings cap on personal contributions, though it does count towards the £60,000 annual allowance.
2026/27 rates used in this calculator
- Income tax: 20% basic rate (£12,570–£50,270), 40% higher rate (£50,270–£125,140), 45% additional rate (above £125,140)
- Employee NI: 8% on earnings £12,570–£50,270, 2% above £50,270
- Employer NI: 15% on earnings above £5,000 (secondary threshold)
- Annual allowance: £60,000 (employer + employee contributions combined)
- Personal allowance: £12,570 (tapers for income above £100,000)
Frequently asked questions
Does salary sacrifice affect my State Pension?
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.
Does it affect mortgage applications?
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.
Can I change or stop my salary sacrifice arrangement?
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.
What happens to the annual allowance under salary sacrifice?
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 full salary sacrifice analysis with monthly pay breakdowns, auto-enrolment and comparison tools, visit:
uksalarysacrificecalculator.co.uk