Salary Sacrifice Calculator 2025/26
Calculate exactly how much you save by sacrificing salary into your pension. See the Income Tax and NI savings, the actual reduction in take-home pay, and the real cost per pound going into your pension pot.
Your Details
Total Annual Tax Saving
£0
£0 less take-home for £0 in pension
Monthly Before
£0
Monthly After
£0
Income Tax Saved
£0
NI Saved
£0
Total Saving
£0
Into Pension
£0
Cost per £1
£0
Saving Rate
0%
How Salary Sacrifice Works
Salary sacrifice is an agreement between you and your employer to reduce your contractual salary. Your employer then pays the sacrificed amount directly into your pension. Because this happens before Income Tax and National Insurance are calculated, you save both taxes on the full amount — making it the most tax-efficient way to contribute to a pension.
For a basic rate taxpayer, every £1 sacrificed costs just £0.72 in lost take-home pay (saving 20% tax + 8% NI). For a higher rate taxpayer it costs only £0.52 (saving 40% + 8%). And for someone in the £100k-£125k PA taper zone, the effective saving can exceed 60%.
Your employer also saves their 13.8% NI on the sacrificed amount. Many employers pass some or all of this saving back to you as an additional pension contribution, making the arrangement even more beneficial.
What You Need to Know About Salary Sacrifice
Your reduced salary must not fall below the National Minimum Wage. Salary sacrifice also reduces your headline salary, which can affect mortgage applications, maternity pay (SMP is based on actual earnings), and other benefits linked to salary. Some employers offer "flexible" sacrifice arrangements that can be adjusted or opted out of.
Student loan repayments are calculated on pre-sacrifice earnings, so salary sacrifice does not reduce your student loan payments. The annual pension allowance of £60,000 applies to the total amount going into your pension, including any employer contributions and the sacrificed amount.
Frequently Asked Questions
What is salary sacrifice for pension?
An arrangement where you agree to a lower salary and your employer pays the difference into your pension. You save both Income Tax and NI because the sacrifice happens before these are calculated.
How much tax do I save with salary sacrifice?
You save Income Tax at your marginal rate plus employee NI (8% or 2%) on the sacrificed amount. A 40% taxpayer sacrificing £10,000 saves £4,800 — the real cost is only £5,200 for £10,000 in pension.
Does salary sacrifice affect my mortgage application?
It can. Some lenders use your reduced contractual salary, others use pre-sacrifice income. Check with your lender before applying if you're planning to take out a mortgage.
Can I salary sacrifice my bonus into a pension?
Yes, many employers allow one-off bonus sacrifice. This is especially tax-efficient if your bonus would push you above £100,000 or into a higher band.
What is the minimum salary after sacrifice?
Your salary must not fall below the National Minimum Wage. For 2025/26, the National Living Wage for those 21+ is £12.21 per hour. Your employer should prevent any sacrifice that would breach this.
Does salary sacrifice reduce student loan repayments?
No. Student loan repayments are based on actual earnings before sacrifice, not your reduced contractual salary. HMRC uses pre-sacrifice income for student loan calculations.
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