Does salary sacrifice save National Insurance?

Yes. The sacrificed salary is never paid, so no employee National Insurance is charged on it — 8% between £12,570 and £50,270, or 2% above £50,270 for 2026-27 (unchanged from 2025-26). The employer also saves 15% secondary NI, which it may add to your pension.

Why does a personal pension contribution not save National Insurance?

A relief-at-source or net-pay personal contribution comes out of pay that has already had National Insurance charged on it. Only salary sacrifice removes the pay before NI applies, so only salary sacrifice saves it.

Tax relief and salary sacrifice · Salary sacrifice

Salary sacrifice and National Insurance: the saving a tax-only comparison leaves out

A relief-at-source pension contribution saves income tax but not National Insurance. Salary sacrifice saves both — and the employer’s NI saving can land in your pension on top.

3 min read · Last reviewed 23 Sept 2026

— In short

Salary sacrifice saves National Insurance because the sacrificed pay is never received, so it never enters the NI computation. Employees save employee Class 1 NI at 8% between the primary threshold and the upper earnings limit, or 2% above it, and the employer saves 15% secondary NI that a good scheme adds to the pension. A relief-at-source contribution saves income tax but never NI.

Put the rule to work

Run the calculation

Use the Salary Sacrifice Pension calculator with your figures and see the working. Free, with no sign-up required.

Run the calculator

On this page

Calculators for this topic (3)

A comparison that models only income tax relief stops short. For a personal, relief-at-source contribution that is right: you pay it from taxed income, the provider reclaims basic-rate relief, and higher-rate relief comes through self-assessment — but National Insurance has already been charged on the pay, and none of it comes back.

Salary sacrifice works differently. The pay is never received, so it never enters the National Insurance computation. That saves employee NI on top of the income tax, and it saves the employer’s NI too.

The employee saving

Employee Class 1 NI for 2026-27 is 8% on earnings between the primary threshold (£12,570) and the upper earnings limit (£50,270), then 2% above. The NI saved on a sacrifice turns on where the salary sits. A basic-rate earner below the UEL saves 8% on the sacrificed pay. A higher- or additional-rate earner is already above the UEL (in the rest of the UK the higher rate starts where the UEL ends), so they save only 2% on pay above it, and 8% only on any slice the sacrifice takes back below £50,270. So a £1,000 sacrifice saves £80 of NI for someone earning £40,000, but only £20 for someone earning £60,000 or £120,000.

The employer saving

The employer pays secondary (employer) Class 1 NI at 15% on earnings above the £5,000 secondary threshold from 6 April 2025 — up from 13.8% above £9,100 the year before. A lower salary means a lower employer NI bill, and a well-designed scheme adds that 15% to the pension contribution. On a £1,000 sacrifice that is another £150 into the pension at no cost to you.

Higher-rate employee above the UEL · 2026/27 · £1,000 sacrificed · employer passes on its NI in full

Income tax saved (40%): £400.00
Employee NI saved (2%): £20.00
Fall in take-home: £580.00
Employer NI saving added (15%): £150.00
Total into the pension: £1,150.00

SSCBA 1992 s.8 (primary) and s.9 (secondary) ; gov.uk/national-insurance-rates-letters.

The salary sacrifice calculator models the employee saving across the UEL crossover and lets you set how much of the employer NI is passed on. From 6 April 2029 legislation provides for a £2,000 annual cap on this NI relief, to be brought in by regulations — salary sacrifice and the 2025 Budget.

Put this to work.

Open the Salary Sacrifice Pension calculator and enter your client's figures. Salary Sacrifice Pension calculator

Create a free account for guided calculations, no card needed. Where a calculator offers a compliance annex PDF, the annex sets out the calculation and its HMRC references, with your firm’s name on every page. If you have edited a calculator here, those inputs stay in this browser for 15 minutes after you click below.

Create free account

Use made-up figures until your firm holds our DPA.

Common questions

Does salary sacrifice save National Insurance?: Yes. The sacrificed salary is never paid, so no employee National Insurance is charged on it — 8% between £12,570 and £50,270, or 2% above £50,270 for 2026-27 (unchanged from 2025-26). The employer also saves 15% secondary NI, which it may add to your pension.
Why does a personal pension contribution not save National Insurance?: A relief-at-source or net-pay personal contribution comes out of pay that has already had National Insurance charged on it. Only salary sacrifice removes the pay before NI applies, so only salary sacrifice saves it.
How much employer National Insurance does salary sacrifice save?: The employer saves secondary Class 1 NI at 15% on the sacrificed amount above the £5,000 secondary threshold (from 6 April 2025). On a £1,000 sacrifice that is £150 — which a generous scheme adds to your pension.

Sources

Based on SSCBA 1992 (National Insurance) and the NICs (Secondary Class 1 Contributions) Act 2025.

National Insurance rates and categories gov.uk
Social Security Contributions and Benefits Act 1992, section 8 — Calculation of primary Class 1 contributions legislation.gov.uk
Social Security Contributions and Benefits Act 1992, section 1 legislation.gov.uk
Social Security Contributions and Benefits Act 1992, section 9 — Calculation of secondary Class 1 contributions legislation.gov.uk

For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.