← Calculators/Tax year 2026/27·Last reviewed
Salary sacrifice pension calculator
What a pension salary sacrifice really does: take-home barely moves — because you save income tax AND National Insurance — while the pension jumps, with the employer's NI saving on top if they pass it on.
Free, no sign-up. Runs the same engine and versioned tax-year config as the signed-in suite — the pension and bond calculation workbench UK paraplanners use to produce compliance-annex PDFs. Your calculator figures stay in this browser unless you choose to share or rerun them in the signed-in workbench. How we verify the numbers.
— In short
Salary sacrifice swaps part of your gross salary for an employer pension contribution. You stop paying income tax andemployee National Insurance on the amount given up — so your take-home falls by much less than the amount sacrificed — and the whole sum (often plus the employer's own NI saving) goes into your pension. Because it also lowers adjusted net income, it can restore a tapered personal allowance, child benefit or childcare.
ParaplanAI calculator illustration
Salary Sacrifice Pension
Tax year 2026/27 · Last reviewed 20 Jul 2026
Pension in payment, property, etc. — taxed, but not subject to NI.
Sacrificing £10,000.00
costs your take-home £3,800.00
but puts £11,500.00 into your pension (incl. a £1,500.00 employer NI top-up) — an effective uplift of 302.6%.
Now (no sacrifice)
- Take-home (after tax + NI)
- £72,357.40
- Income tax
- £33,432.00
- Employee NI
- £4,210.60
- Personal allowance
- £7,570.00
- Into the pension (this route)
- £0.00
With £10,000.00 sacrificed
- Take-home (after tax + NI)
- £68,557.40
- Income tax
- £27,432.00
- Employee NI
- £4,010.60
- Personal allowance
- £12,570.00
- Into the pension
- £11,500.00
Dropping your adjusted net income also restores £5,000.00 of personal allowance. See the full £100k / 60% tax-trap picture.
Salary sacrifice is an employer pension contribution, so what counts toward the annual allowance is everything that reaches the pension — the sacrifice plus any employer National Insurance passed through (FA 2004 s.233(1)(b)) — not the sacrifice on its own. A post-9-July-2015 arrangement is added back to threshold income, so it reduces adjusted net income (rescuing the allowances above) but does not relieve the tapered annual allowance. It also lowers the salary-linked reference for death-in-service cover, statutory maternity/redundancy pay and mortgage affordability.
SSCBA 1992 s.8–9 · ITEPA 2003
For planning and illustration purposes only. Verify all inputs against source documents. This tool does not constitute financial or tax advice.
Print this quick illustration now. Signed-in users can add a client or file reference before saving it as a PDF — the branded compliance annex, with the full working and HMRC references on every page, comes from the signed-in workflow.
Keep the working
Save this as a branded compliance annex PDF.
A free account saves this calculation to a client record and renders the annex — 3 a month, no card.
Want it saved to a client with a branded compliance annex? The pension contribution workbench models the same contribution and produces the PDF.
— How it's calculated
Income tax and National Insurance — the saving most tools miss
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).
ITEPA 2003 (employment income) · SSCBA 1992 s.8 · HMRC NIM01001
The employer NI saving — and whether they pass it on
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 toggle above models 0%, 50% or 100% pass-through. (The Employment Allowance, which can offset some employer NI, is not modelled — this is the gross per-employee saving.)
SSCBA 1992 s.9 · National Insurance Contributions (Secondary Class 1 Contributions) Act 2025
The threshold rescue: personal allowance, child benefit, childcare
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.
Annual allowance: it does NOT escape the taper
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.
FA 2004 s.233(1)(b) (employer contributions as pension input) · s.228ZA(5) · PTM057100
Guardrails
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 or working pattern, so it does nottest the minimum wage floor for you — 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 (toggle above); National Insurance is UK-wide.
National Minimum Wage Act 1998 · gov.scot Scottish income tax rates
— How to work out what a pension salary sacrifice is worth
Step 1
Take the amount sacrificed
Start with the gross salary you give up — this is what the employer pays into the pension.
Step 2
Subtract the income tax saved
The sacrificed salary is no longer taxed, so you save income tax at your marginal rate (including any personal allowance reinstated between £100,000 and £125,140).
Step 3
Subtract the employee NI saved
You also save employee National Insurance on the sacrificed band — 8% up to the upper earnings limit, 2% above it.
Step 4
That fall in take-home is the real cost
Amount sacrificed minus income tax saved minus employee NI saved is the actual reduction in your pay packet.
Step 5
Add the employer NI saving (if passed on)
Add the employer’s secondary NI saving on the sacrificed band, to the extent the employer passes it on, to the amount landing in the pension.
— Worked example
- Income tax saved (40% + personal-allowance reinstated)
- £6,000
- Employee NI saved (2% above the UEL)
- £200
- Fall in take-home (the real cost)
- £3,800
- Employer NI saving passed into the pension
- £1,500
- Total into the pension
- £11,500
- Effective uplift (pension ÷ take-home cost)
- 302.6%
Figures computed live by the same engine the tool above runs. At £110k the £10k sacrifice also reinstates the full £12,570 personal allowance (the 60% band), which is why £3,800 of take-home buys £11,500 of pension.
— Frequently asked questions
How much does salary sacrifice actually save?
On the amount you sacrifice you save income tax at your marginal rate and employee National Insurance (8% between the primary threshold and the upper earnings limit, 2% above it). A basic-rate taxpayer sacrificing £1,000 sees take-home fall by about £720 (saving £200 tax + £80 NI) while £1,000 — plus any employer NI passed on — goes into the pension. A relief-at-source contribution would save the £200 tax but not the £80 NI.
Does salary sacrifice save National Insurance?
Yes — that is the key difference from a personal pension contribution. The salary you give up is never paid, so neither employee NI nor income tax is charged on it. The employer also saves secondary (employer) NI at 15% above £5,000 (from 6 April 2025), which they may add to your pension contribution.
Does salary sacrifice help with the £100,000 / 60% tax trap?
Yes. Salary sacrifice reduces adjusted net income, so between £100,000 and £125,140 it reinstates the personal allowance (an effective 60% saving), claws back the High Income Child Benefit Charge between £60,000 and £80,000, and restores Tax-Free Childcare and funded hours once income drops below £100,000.
Does salary sacrifice avoid the tapered annual allowance?
No. A salary-sacrifice arrangement set up on or after 9 July 2015 is added back to threshold income for the tapered annual allowance, so it does not reduce threshold income and cannot relieve the taper — even though it does reduce adjusted net income for the personal allowance, child benefit and childcare. It also counts as an employer contribution toward the annual allowance, and the amount that counts is everything that reaches the pension — the sacrifice plus any employer National Insurance passed through, not the sacrifice alone (FA 2004 s.233(1)(b)).
What are the downsides of salary sacrifice?
It cannot reduce your pay below the National Minimum or Living Wage — a check the calculator above does not perform, because it takes no hourly rate or working pattern, so confirm it against the actual contracted hours. It also lowers the salary figure used for some salary-linked benefits — death-in-service cover, statutory maternity and redundancy pay, and mortgage affordability assessments. The pension is locked away until at least age 55 (57 from 6 April 2028).
— Related
- Income tax traps: the complete guide
- The £100k / 60% tax trap calculator — the full threshold picture
- High income child benefit charge calculator
- Adjusted net income calculator — the figure salary sacrifice reduces
- What is salary sacrifice, and how does it work?
- Is salary sacrifice worth it? The pros, cons and catches
- Pension contribution workbench — model it against a client and produce a PDF
- How every figure is verified against the legislation
— When you're ready
Put this calculation in the client file.
ParaplanAI is the paraplanner's calculation workbench: the same engine as this free tool, plus document extraction, full multi-event workflows, and a branded compliance annex PDF with the step-by-step working and its HMRC references — the file a compliance officer signs.