Salary sacrifice pension calculator

A personal (relief-at-source) contribution saves income tax but not National Insurance. Salary sacrifice saves both: the salary you give up is never paid, so no income tax and no employee NI are charged on it. The take-home fall is therefore the amount sacrificed minus the income tax saved (at your marginal rate) minus the employee NI saved (8% between the primary threshold and the upper earnings limit, 2% above it).

Because the salary is reduced, the employer also saves secondary (Class 1) National Insurance — 15% on the band above the £5,000 secondary threshold from 6 April 2025 (13.8% / £9,100 in 2024-25). Many employers add that saving to the pension contribution; the pass-through setting under Add other income or details models 0%, 50% or 100%. (The Employment Allowance, which can offset some employer NI, is not modelled — this is the gross per-employee saving.)

Sacrifice reduces adjusted net income, so where it crosses a threshold it does double duty: between £100,000 and £125,140 it reinstates the personal allowance (the 60% band); between £60,000 and £80,000 it claws back the High Income Child Benefit Charge; and dropping below £100,000 restores Tax-Free Childcare and funded hours. The tool flags the allowance and child benefit regained, and links to the full tax-trap picture.

Two things advisers conflate. The sacrifice counts as an employer contribution toward the annual allowance, and — for arrangements set up on or after 9 July 2015 — it is added back to threshold income for the tapered annual allowance test. So salary sacrifice reduces adjusted net income (helping the personal allowance, HICBC and childcare) but does not reduce threshold income and cannot relieve the AA taper. The tool flags if total pension input may exceed the available allowance.

Watch what “the sacrifice” means for that test. Every employer contribution is pension input (FA 2004 s.233(1)(b)), so the figure measured against the allowance is the amount that reaches the pension — the sacrifice plus any employer National Insurance the employer passes through, not the sacrifice alone. In the example above £10,000 is sacrificed but £11,500 lands in the pension, and it is the £11,500 that counts. Testing the raw sacrifice is how a real breach goes unnoticed when the passback is the amount that tips it over.

The National Insurance Contributions (Employer Pensions Contributions) Act 2026 received Royal Assent on 29 April 2026. It lets regulations, from the 2029-30 tax year, treat pension contributions made through salary sacrifice above an annual contributions limit as earnings, bringing the excess into employee and employer Class 1 National Insurance; the first regulations must set that limit at £2,000, and contributions up to it stay outside National Insurance. Income-tax relief is unchanged. The regulations, and HMRC's payroll guidance, have not yet been made.

The tool applies the rules for the tax year selected above and does not model the cap, so for a sacrifice above £2,000 its NI figures are not a guide to 2029-30 and later years.

Salary sacrifice cannot take pay below the National Minimum/Living Wage, and it lowers the salary-linked reference used for death-in-service cover, statutory maternity and redundancy pay, and mortgage affordability. The quick tool above takes no hourly rate, working pattern or age, so it can only compare the salary left with the National Living Wage for a 37.5-hour week at age 21 and over; it does not test the minimum wage floor for the worker's own hours, age or apprenticeship — check it against the worker's actual contracted hours before implementing any sacrifice. Scottish taxpayers: the income-tax saving uses the Scottish non-savings bands (choose Scottish taxpayer under Add other income or details); National Insurance is UK-wide.