UK Salary Sacrifice Pension Calculator
Salary sacrifice makes every £1 of pension contribution cheaper — because you skip Income Tax and National Insurance in one move. Enter your salary and see the real numbers: your take-home barely drops, and thousands more land in your pension every year.
What changes
Side-by-side breakdown
| Without sacrifice | With sacrifice | |
|---|---|---|
| Gross salary | £0 | £0 |
| Income Tax | £0 | £0 |
| National Insurance | £0 | £0 |
| Take-home / year | £0 | £0 |
| Pension / year | £0 | £0 |
Adjust the inputs to see how sacrifice affects you.
Why salary sacrifice beats a personal pension
The two routes into a workplace pension look similar on the surface: money leaves your payslip, tax relief gets applied, and a bigger sum lands in the pension pot. But the mechanics — and the resulting cost per £1 — are meaningfully different.
Salary sacrifice (net pay arrangement, sacrifice variant)
You contractually agree to a lower salary; the employer pays the difference into the pension. Because the £X never counts as your pay, you save:
- Income Tax at your marginal rate (20%, 40%, or 45%)
- Employee National Insurance (8% in the primary band, 2% above the upper limit)
- Employer's NI too — 13.8% they'd otherwise pay HMRC, which some employers pass back
Personal pension via relief-at-source
You pay after-tax money into a pension. The provider claims 20% back from HMRC and adds it to your pot. If you're a higher-rate taxpayer, you then claim another 20% back through Self Assessment. National Insurance? Not reclaimable. That NI portion is the entire mechanical advantage of salary sacrifice.
Where salary sacrifice earns the most
The highest-leverage bands are:
- £100,000–£125,140: the Personal Allowance taper creates a ~60% marginal rate. Sacrificing back under £100k restores the full allowance and can give an effective saving of 60%+ on those sacrificed pounds.
- Basic-rate (under £50,270): you save the full 8% employee NI, so the total tax + NI saving is 28% — much better than the 20% relief-at-source gives.
- Around the child-benefit cliff (£60,000–£80,000): if you have children, sacrificing to under £60k preserves child benefit that would otherwise be fully clawed back.
Related calculators
- UK Take-Home Pay — see how your salary lands after tax + NI.
- Scottish Take-Home Pay — same numbers under Scotland's bands.
- Retirement calculator — project the extra pension over 20–40 years.
- Compound interest — the real reason another £5k/year matters.
Frequently asked questions
What exactly is salary sacrifice?
You agree with your employer to reduce your contractual gross salary by an amount that goes straight into your pension. Because it never legally reaches you as pay, you don't pay Income Tax or National Insurance on it — and neither does your employer. That NI saving is the reason salary sacrifice beats a personal pension for the same contribution.
How is this different from a normal workplace pension contribution?
A standard 'relief at source' or 'net pay arrangement' contribution saves you Income Tax but not employee National Insurance (8% on the basic band, 2% above). Salary sacrifice saves both. On a £5,000 annual contribution, a basic-rate employee saves £400 extra in NI vs a personal pension. A higher-rate employee saves £100 extra. Employers also save 13.8% NI, which some pass back into your pension.
What is 'employer NI pass-through'?
Every £1 you sacrifice saves your employer 13.8p in employer's National Insurance. Some employers pass this saving back into your pension. If they do, your effective saving jumps dramatically — £5,000 sacrificed becomes £5,690 in the pot at zero extra cost to you. Ask your HR or scheme administrator; the answer is usually either 'yes, 100%', 'yes, split', or 'no'.
Are there any downsides?
A lower gross salary can affect: (1) mortgage borrowing — some lenders use the sacrificed figure, (2) statutory maternity/paternity/sick pay, (3) death-in-service cover if it's a multiple of salary, (4) any other salary-linked benefits. It cannot take you below the National Living Wage. It also reduces your entitlement to some means-tested benefits (rare for higher-rate taxpayers). For most people well above the minimum wage without imminent life events, the pension gain outweighs these.
Does salary sacrifice work at £100k+?
Yes — arguably it's most valuable there. Between £100,000 and £125,140 your Personal Allowance tapers, giving an effective marginal rate of about 60% (income tax 40% + PA loss 20% + NI 2%). Sacrificing enough salary to bring gross under £100k restores the full Personal Allowance. Our calculator handles this automatically.
What rates does this calculator use?
England, Wales and Northern Ireland tax bands for the 2024/25 tax year (£12,570 personal allowance, 20% up to £50,270, 40% up to £125,140, 45% above; PA tapers £100,000–£125,140). Employee National Insurance is 8% between the primary threshold and upper earnings limit (£12,570–£50,270), 2% above. Employer NI is 13.8% above the secondary threshold of £9,100. Scottish tax bands are different — we'll add a Scottish variant separately.
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