Salary sacrifice calculator

How it works

With salary sacrifice you agree to a lower salary and your employer pays the difference into your pension (or towards a benefit such as a bike or electric car). Because your salary is lower, you pay less income tax, less National Insurance and, if you have one, less student loan. This calculator compares your pay with and without the sacrifice.

What you save

• Income tax at your highest rate: 20%, 40% or 45% (Scottish rates in Scotland).
• National Insurance: 8% below £50,270 and 2% above. This is the saving you don’t get with other ways of paying into a pension.
• Student loan: 9% above your plan’s threshold.

Your employer also saves 15% employer National Insurance. Some pass part or all of that saving to your pension; enter the percentage to include it.

The real cost of each £1

The most useful number is what each £1 that lands in your pension costs you in take-home pay. It’s 1 minus your combined marginal rate of tax, National Insurance and student loan. The bigger your marginal rate, the cheaper pension saving becomes.

Escaping the 60% trap

Between £100,000 and £125,140 you lose £1 of Personal Allowance for every £2 of income, so the effective tax rate is 60%. Salary sacrifice reduces your adjusted net income, so you get the allowance back. The calculator tells you when your sacrifice escapes the trap, or how much more would.

Before you sign up

Salary sacrifice can’t take your pay below the National Minimum Wage, and a lower contractual salary can affect mortgage affordability checks, Statutory Maternity Pay, some benefits and salary-linked life cover. Check your employer’s scheme rules.

Salary sacrifice for other benefits

Pensions are the most common use, but many employers offer salary sacrifice for bikes, electric cars, extra holiday or technology. The tax and National Insurance savings work the same way. With an electric car there is usually a small taxable benefit to add back, so enter the car’s taxable value in the main calculator to see the overall effect.

Sacrifice or relief at source?

If your workplace pension uses relief at source or net pay, you still get income tax relief on contributions, but you pay National Insurance on the full salary. Switching the same contribution to salary sacrifice, where your employer offers it, adds the National Insurance saving on top. It’s usually the cheapest way to pay into a pension as an employee, which is why many employers offer it as the default.

Rates verified against HMRC on 5 October 2026.

Worked example

On £45,000, sacrificing £2,000 saves £400.00 income tax and £160.00 National Insurance. Your take-home falls by £1,440, so each £1 in your pension costs £0.72.

On £110,000, sacrificing £10,000 brings you back to £100,000: your take-home falls by only £3,800, £0.38 per £1.