Salary sacrifice pension calculator (UK)

How to use the salary sacrifice calculator

1. Under Your pay (2026/27), enter your Salary before sacrifice, choose where you pay income tax (England, Wales or NI, or Scotland) and pick any Student loan plan.
2. Under The sacrifice, choose % of salary or £ a year, then enter the amount.
3. Add your Employer’s own contribution, and say if your employer adds its NI saving to your pension: No, Half or All.
4. Enter the Hours you work a week, so the calculator can check your pay stays above the National Living Wage.
5. Switch on Apply the £2,000 NI cap to see the same sacrifice under the rules due from April 2029.

The big figure is what each £1 going into your pension costs your take-home pay. The table under it shows your pay line by line: before, after, and after with the 2029 cap.

How the numbers are worked out

The calculator works out income tax, employee National Insurance and student loan repayments on your salary before and after the sacrifice, at 2026/27 rates, then compares your take-home pay:

Take-home pay falls by = sacrifice − income tax saved − employee NI saved − student loan saved

The defaults are a £40,000 salary outside Scotland, a 5% sacrifice and no student loan, so you give up £2,000 a year. Your taxable pay above the £12,570 personal allowance drops from £27,430 to £25,430, all in the 20% band, so income tax falls by £400. Employee NI is 8% between £12,570 and £50,270, so it falls by £160. Take-home pay drops by £2,000 − £400 − £160 = £1,440, or £120 a month. That’s 72p for each £1 in the pension.

Your employer saves 15% NI on the £2,000: £300. With its own 3% (£1,200), £3,200 goes into your pension each year, or £3,500 if it adds its NI saving. These are yearly figures; a payslip works per pay period, so yours can differ by a few pounds. The compound interest calculator shows what £3,200 a year could grow to by the time you retire.

Salary sacrifice, relief at source and net pay

Pay usually reaches a workplace pension in one of three ways, and they differ in which taxes they skip.

With salary sacrifice, you agree to a lower salary and your employer pays the difference into your pension. That slice of pay attracts no income tax and no employee or employer NI, which is how you and your employer can both pay less (GOV.UK).

With a net pay arrangement, your employer takes the contribution out of your pay before working out income tax (GOV.UK). You still pay NI on it.

With relief at source, you pay in from take-home pay. Your provider claims 20% basic-rate relief and adds it. Higher and additional-rate taxpayers claim the rest through Self Assessment: 20% more on income taxed at 40%, and 25% on income taxed at 45%. In Scotland the extra is 1% on income taxed at 21%, 22% at 42%, 25% at 45% and 28% at 48%, and starter-rate (19%) taxpayers still get the full 20%.

The gap between salary sacrifice and the others is mostly National Insurance: 8p in every £1 between £12,570 and £50,270, and 2p above that. On £60,000, a £3,000 sacrifice costs £1,740 of take-home pay (58p per £1), against £1,800 through relief at source once the higher-rate relief is claimed.

The £2,000 cap from April 2029

From 6 April 2029, salary-sacrificed pension contributions above £2,000 a year are due to pay employee and employer NI (Budget 2025, paragraph 2.9). Income tax relief stays as it is. HMRC’s policy paper of 4 December 2025 describes the employer side, and the government said it would bring in primary and secondary legislation. We haven’t confirmed how far that legislation has got.

Under the cap, the first £2,000 a year keeps its NI saving and the rest loses it. On £40,000, a £4,000 sacrifice costs £2,880 of take-home pay today (72p per £1). With the cap, the £2,000 above it pays 8% employee NI, which is £160, so the cost becomes £3,040 (76p), and the employer’s NI saving halves from £600 to £300. At £2,000 or less, nothing changes. The calculator applies the cap at 2026/27 rates and thresholds.

Earning over £100,000

Your personal allowance shrinks by £1 for every £2 of adjusted net income over £100,000 and is gone at £125,140 (GOV.UK). In that range each extra £1 of pay is taxed at 40% and also removes 50p of allowance, which costs another 20p: an effective 60%, plus 2% NI. Our tax bracket guide covers marginal rates.

On £110,000, sacrificing £10,000 cuts income tax by £6,000 (from £33,432 to £27,432) and NI by £200. Take-home pay falls by £3,800: 38p per £1. With the 2029 cap it would be £3,960 (40p). Personal contributions lower adjusted net income too, so relief at source also restores the allowance, and the same £10,000 that way costs £4,000 once the extra relief is claimed.

Child Benefit works on the same income. The High Income Child Benefit Charge takes back 1% of Child Benefit for every £200 of adjusted net income over £60,000, and all of it above £80,000. Say Femi earns £64,000 and claims for one child, at £27.05 a week (about £1,407 a year). His charge is 20% of that, about £281. A £4,000 sacrifice takes him to £60,000: the calculator shows his take-home pay falling by £2,320 (58p per £1), and with the charge gone, the real cost is about £2,039, or 51p per £1. The calculator leaves the charge out, so add it yourself.

Contributions from you and your employer count toward the £60,000 annual allowance, which tapers if your threshold income is over £200,000 and your adjusted income over £260,000. The calculator warns you above £60,000.

What a lower salary can change

HMRC’s guidance on salary sacrifice and PAYE (updated 6 April 2026) sets out what else a sacrifice can affect.

It must not take your cash earnings below the National Minimum Wage. The National Living Wage is £12.71 an hour for workers aged 21 and over from 1 April 2026, which at 37.5 hours a week is £24,784.50 a year (£12.71 × 37.5 × 52). On a £26,000 salary, then, the most you could sacrifice is about £1,215. A 5% sacrifice (£1,300) would go below it, and the calculator warns you.

It can reduce statutory pay. If it takes your average weekly earnings below the lower earnings limit (£129 a week in 2026/27), your employer doesn’t have to make statutory payments to you at all. It can also affect earnings-related benefits such as Maternity Allowance, and contribution-based benefits including the State Pension.

Your employer decides whether pay rises, overtime rates and pension contributions are based on your old salary or the reduced one, and has to make that clear to you.

The guidance doesn’t mention mortgages. Your P60 will show the lower salary, so if you’re applying for a mortgage, ask the lender which figure it uses.

Examples at £30,000, £60,000 and £110,000, plus Scotland

All rows use 2026/27 rates, no student loan, and an employer that keeps its NI saving. Rows without “Scotland” are for England, Wales and Northern Ireland, and the cap column applies the 2029 rule at 2026/27 rates.

Scotland’s bands make the biggest difference between £43,663 and £50,270, where Scottish taxpayers pay 42% income tax and still pay 8% NI. On £50,000 there, a £2,000 sacrifice saves £840 of income tax and £160 of NI, so each £1 costs 50p, against 72p in the rest of the UK. At £40,000 (the 21% intermediate rate), it’s 71p.

Scroll is education, not advice. Our lessons and calculators explain how money works in general. They don’t know your circumstances, so they can’t tell you what to do with yours. For that, speak to a qualified, regulated adviser in your country.