UK Salary Sacrifice Savings Calculator
Estimate the tax and NI effect of exchanging salary for a registered pension contribution or qualifying Cycle to Work scheme. Electric cars, legacy childcare vouchers and other taxable benefits need separate calculations and are excluded here.
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A common misunderstanding is that salary sacrifice affects your state pension entitlement. For most people it does not, provided your post-sacrifice salary stays above the Lower Earnings Limit (£6,708 in 2026/27).
Understanding your potential savings helps you decide how much to sacrifice and which benefits to prioritise. Enter your salary and intended sacrifice amount below.
Based on 2026/27 tax year rates. Pay and tax calculations reviewed: October 2026.
Your Details
Different tax bands apply in Scotland
EVs need car Benefit in Kind tax; legacy childcare vouchers have eligibility and exemption limits. These and other taxable benefits are excluded. For Cycle to Work, this excludes ownership-transfer fees.
Annual amount to sacrifice for pension
Based on 2026/27 rates, one job and employee NI category A. Cash pay must stay above National Minimum Wage, which depends on your hours and age; this calculator does not check that limit. Employer agreement and scheme eligibility are required.
Your Tax & NI Savings
Total Annual Savings
£1,400.00
Income Tax Saved
£1,000.00
NI Saved
£400.00
Real Cost of Benefit
You get £5,000.00 of benefit for just £3,600.00 real cost
Take-Home Pay Comparison
What this means for your pension pot
For a registered pension, salary sacrifice reduces the cash pay used for Income Tax and employee NI. At £60,000 salary in England, Wales or Northern Ireland, sacrificing £200/month puts £200/month into your pension and reduces take-home pay by about £116/month, assuming no student loan or other deductions. Employer NI savings are separate and only increase your pot if the employer passes them on.
The catch: your gross salary drops, which can affect mortgage borrowing capacity and statutory pay (SMP, redundancy). Cash pay must stay above National Minimum Wage. Check scheme eligibility, your pension allowance and the effect on statutory pay before agreeing a change.
Why Can Pension Salary Sacrifice Reduce Tax?
Salary sacrifice works by reducing your gross salary before tax and National Insurance are calculated. Instead of receiving the money as taxable income, your employer provides you with a benefit of equivalent value.
Without Salary Sacrifice
- You receive full gross salary
- Tax and NI are deducted
- You pay for benefit from net income
- Benefit costs you full price
With Salary Sacrifice
- Gross salary is reduced
- Lower tax and NI calculated
- Employer provides benefit directly
- Benefit costs you less after tax savings
These examples assume an exempt registered pension or qualifying cycle scheme. Other benefits can create a taxable benefit charge. Higher rate taxpayers (40%) can save nearly half the cost of benefits through salary sacrifice.
Important Considerations
Employer Policies Vary
Not all employers offer salary sacrifice schemes, and those that do may have different terms. Some employers pass on their NI savings to employees (typically 15% extra), while others keep it. Always check your specific scheme details.
National Minimum Wage
Your salary after sacrifice cannot fall below the National Minimum Wage. If you're close to this threshold, you may not be able to sacrifice as much as you'd like.
Salary-Linked Benefits
Benefits calculated on your salary (like life insurance, sick pay, or redundancy pay) may be reduced. Check with your employer whether they use pre- or post-sacrifice salary for these calculations.
Commitment Period
Salary sacrifice arrangements are typically binding for a set period (e.g., 12 months). You usually can't opt out early unless you experience a "lifestyle event" like marriage, divorce, or redundancy.
Frequently Asked Questions
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