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Salary Sacrifice Pension Calculator

See how much income tax and National Insurance you save by paying into your workplace pension via salary sacrifice. Includes the long-term impact on your retirement pot with compound growth.

Tax year 2026/27. England, Wales and Northern Ireland rates. Scotland has different rates — check with your provider. Projections assume constant salary and investment returns. Not financial advice.

What is salary sacrifice?

Salary sacrifice means your employer reduces your gross pay and pays the amount directly into your workplace pension instead. You never receive that money as income, so you save both income tax AND National Insurance. This is different from a normal pension contribution, where you contribute from net pay and claim tax relief.

Your inputs

£15k£250k
0%60%
0%100%
0%10%
145
0%20%

This year's impact

Take-home without sacrifice£0
Take-home with sacrifice£0
Monthly reduction£0
Income tax saved£0
Employee NI saved£0
Student loan saved£0
Employer NI saved£0
Total into pension£0

At retirement

Pension pot value£0
Funded by your sacrifice£0
Cost per £1 in pension£0
Your verdict

Adjust your inputs to see the impact on your take-home pay and retirement pot.

Annual sacrificeWaiting for sacrifice detail.
Effective supportWaiting for the take-home cost view.
Best next checkCheck employer NI sharing, annual-allowance room and any benefit side effects.

What this means

Salary sacrifice is strongest when it lowers tax, employee NI, and potentially employer NI at the same time. The professional question is whether those savings outweigh any mortgage, statutory-pay or annual-allowance friction for your situation.

Professional read

How to read the salary-sacrifice result properly

The serious version of this decision is about net support, employer behaviour, and side effects. A pension contribution can look brilliant on tax alone and still be the wrong move if it weakens something else you actually care about.

Key assumptionsThe model assumes the sacrifice is available, payroll applies it cleanly, and any employer NI sharing happens in the way you entered.
Common mistakeChasing the gross tax saving while forgetting annual-allowance room, mortgage underwriting side effects, or statutory-pay calculations on lower contractual salary.
Best next actionConfirm employer NI sharing, check annual-allowance headroom, and decide whether reducing contractual salary affects any borrowing or leave plans that matter soon.
When this breaks downComplex benefits packages, DB accrual, tapered annual allowance, or lender-specific affordability rules can all change the real answer.
Professional note. The best sacrifice decision is not always the largest sacrifice. It is the one that improves long-run wealth without quietly weakening the rest of your financial plan.
Pension pot growth over time
Your contributions Investment growth

Year-by-year breakdown

How your pension pot accumulates each year, including compound growth on previous balances.

YearContributionsPot balance

Why salary sacrifice beats a normal pension contribution

With a normal pension contribution, you contribute from your net pay and claim 20% basic-rate tax relief. The employer doesn't save anything. With salary sacrifice, both you and your employer save National Insurance, and you avoid income tax entirely on the sacrificed amount.

ScenarioYour costEmployer costIn your pension
Normal contribution (net pay)£100£100£120 (with relief)
Salary sacrifice~£75~£85£100
The catch: check your employer first

Before you sacrifice, verify three things. One: is salary sacrifice available at your workplace? Two: does your employer pass on any of the NI saving to your pension? Many don't — some pass 100%. Three: check your mortgage lender won't reject you because your sacrificed pay looks lower to them. Always ask HR.

The 60% tax trap — the hidden win

If your salary is between 100,000 and 125,140, salary sacrifice restores your Personal Allowance pound-for-pound as you sacrifice below 100,000. This gives you an effective 60% relief on each pound — because you save 20% income tax, 8% employee NI, 15% employer NI, and you get back the allowance taper.

Worked example: the 60% zone

You earn 105,000. You sacrifice 5,000 down to 100,000. Without sacrifice: PA is tapered down (you lose 2,500 of the 12,570 allowance). With sacrifice: you're at 100,000 exactly, so your full 12,570 PA is restored. That restored 2,500 of allowance is taxed at the higher rate, so it is worth 2,500 * 40% = 1,000 in tax relief. On the 5,000 sacrificed you also save 5,000 * 40% = 2,000 income tax and 5,000 * 2% = 100 employee NI, and your employer saves 5,000 * 15% = 750 NI (extra if shared). Combined personal saving: ~3,100 on a 5,000 sacrifice — an effective 62% relief, rising further when the employer NI is added back.

When salary sacrifice is a bad idea

Mortgage and borrowing

Your lender sees your post-sacrifice salary. If you sacrifice 10%, they may reduce their lending offer by 10% too — potentially costing you more in mortgage interest than you save in tax. Always run the numbers past your lender first.

Statutory pay and benefits

Statutory Maternity Pay (SMP), Statutory Sick Pay (SSP), and Statutory Paternity Pay (SPP) are calculated on your post-sacrifice salary, so they'll be lower. Also, some death-in-service benefits are tied to pensionable pay, which changes under salary sacrifice. Check your scheme documents.

Auto-enrolment and minimum wage

Your sacrificed salary counts as your working income for minimum wage purposes. If you sacrifice enough to drop below the National Minimum Wage, you're breaking the law. Also, if you fall below the auto-enrolment threshold (currently 10,500), your employer no longer has to contribute.

Pension recycling rules

You cannot sacrifice into a pension, then immediately draw out the tax-free lump sum and contribute the cash back. HMRC treats this as a "planned arrangement" and claws back the tax relief. The rules allow you to contribute back after 6 months, or a trivial commutation must be at least 2 years after sacrifice.

The annual allowance and carry-forward

The annual allowance for pension contributions is 60,000 in 2026/27. If you exceed this (including employer contributions), you'll have a tax charge of 40% on the excess. However, you can carry forward unused allowance from the past 3 years. For most employees, salary sacrifice well under the allowance is safe.

Pension calculator — full retirement projection with multiple income sources · Tax calculator — see your full tax bill and take-home · Compound interest calculator — growth projections with any starting pot · ISA vs GIA — tax on investing outside an ISA.

Official references
gov.uk — Salary sacrifice and the effects on PAYE gov.uk — Pension tax relief MoneyHelper — Salary sacrifice explained HMRC — Employment Income Manual
Calculator Methodology

How to read salary sacrifice properly

The strongest salary-sacrifice decision is not just about tax saved today. It is about employer NI sharing, annual-allowance headroom, mortgage or borrowing side effects, and whether statutory-pay calculations get weaker on the reduced contractual salary.

Last reviewed

  • 22 April 2026
  • England, Wales and Northern Ireland payroll assumptions for 2026/27

Who this is for

  • Employees with a workplace pension comparing salary sacrifice against a normal payroll contribution

Main assumptions

  • Standard payroll tax and NI treatment, no Scottish income-tax modelling, and no minimum-wage breach
  • Investment growth is smoothed and mortgage or statutory-pay side effects are not priced directly
What To Open Next

Check the pension and payroll edges before you commit

Salary sacrifice often wins mathematically, but the professional sign-off is annual-allowance room, broader payroll impact, and whether the pension destination still matches the retirement job you want it to do.

Annual allowance calculatorCheck that the extra employer and sacrifice funding still sits inside pension allowance limits. Tax calculatorSee the wider take-home, student-loan and ANI interaction when salary changes. Pension calculatorProject what the higher pension funding could mean by retirement instead of only focusing on this year's savings.
My scenarios
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