UK salary sacrifice calculator

Salary sacrifice: what it actually does to your money

Most calculators show the tax saving. This one shows the retirement impact too - how the same monthly cost compounds into a much bigger pot, and how much earlier you could retire.

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The calculator

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Same monthly cost. Different pension.

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Adjust the inputs to see your numbers.

Without salary sacrifice

Gross salary
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Pension in (gross)
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Income tax
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National Insurance
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Take-home / mo
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With salary sacrifice

Gross salary
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Pension in (gross)
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Income tax
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National Insurance
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Take-home / mo
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See how this changes your retirement pot

Pot at retirement (without)

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Pot at retirement (with)

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Extra pot from sacrifice

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Cost to take-home / mo

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Real-terms projection at the return rate above. Assumes contributions stay at this rate until retirement and your salary rises with inflation. See your full Plannng projection for tax-aware drawdown, ISA/SIPP wrapper choice and Monte Carlo probability.

2025/26 UK figures. England, Wales and Northern Ireland tax bands. Scotland uses different income tax bands - the NI saving still applies. From April 2029, NI applies to sacrifice above £2,000/yr (Autumn Budget 2025) - see what changes. Illustration only. Not financial advice.

How salary sacrifice actually works

You give up part of your gross salary

A formal agreement with your employer reduces your contractual salary. The amount sacrificed never appears on your payslip as income.

Your employer pays it into your pension

Legally it becomes an employer contribution. The money goes straight into your workplace pension or a SIPP if your employer is willing to redirect it.

Because the money never reaches your payslip, you don't pay tax or NI on it

A normal pension contribution saves income tax. Salary sacrifice saves income tax and National Insurance - that's the bit most calculators ignore.

Your employer saves NI too - some pass it on

Employers pay 15% NI (April 2025) on salaries above £5,000. When you sacrifice, they save that too. Good employers add this saving to your pension. It's worth asking.

It's not a loophole

It's a deliberate, HMRC-approved mechanism. Most people don't use it because they don't understand the maths - not because their employer doesn't offer it.

The questions everyone asks

Isn't the government capping this from 2029?

  • Yes - at the November 2025 Autumn Budget, the Chancellor announced that from April 2029, NI will apply to salary-sacrificed pension contributions above £2,000 a year. Both employee and employer NI.
  • Income tax relief on sacrifice is not affected. This is purely an NI change.
  • Below £2,000/yr of sacrifice, the rules stay exactly as they are today - basic-rate workers contributing modest amounts keep the full NI saving.
  • Above £2,000/yr, the NI advantage disappears from April 2029 - sacrifice still saves income tax, just like a net-pay arrangement, but no longer NI.
  • Until April 2029, current rules apply. There is no retroactive element. If you can sacrifice meaningfully now, the next ~3 years are the cheapest window you'll get.

Will it affect my mortgage application?

  • Yes - it reduces your reported income.
  • But most lenders understand salary sacrifice and several will use your pre-sacrifice income or count the sacrifice as discretionary income.
  • If you're about to apply for a mortgage, timing matters. Pause sacrifice for the assessment period or use a broker who knows which lenders look at gross.

Does it affect statutory pay - sick pay, maternity, redundancy?

  • Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP) are calculated on your post-sacrifice salary - that can be a problem.
  • Redundancy pay is also based on your reduced salary unless your contract specifies otherwise.
  • If a major life event is on the horizon, most schemes let you pause sacrifice. Read the policy before you sign up.

What about the annual allowance?

  • Salary sacrifice contributions count toward your pension annual allowance (£60,000 for 2025/26).
  • For most people this isn't a constraint.
  • If your adjusted income is over £260,000, the allowance tapers down to £10,000. Model this carefully - it's the part of the rule book that catches high earners out.

What if I need the money back?

  • You can't reverse a salary sacrifice mid-year unless you have a "lifestyle event" - new baby, partner loses job, marriage, divorce.
  • This is a real trade-off. Don't sacrifice money you might need for emergencies.
  • Most people start small (3-5%), build an emergency fund, then ratchet up.

Is it worth it for basic-rate taxpayers?

  • Yes - because of the NI saving, which a relief-at-source pension contribution doesn't capture.
  • On £35,000 a year, sacrificing 5% (£1,750) gets the full £1,750 into your pension at a take-home cost of around £1,260 - a 28% effective discount.
  • Over a 30-year career with employer match and 4% real growth, that's roughly £100k of extra pension.

Salary sacrifice vs after-tax pension contributions

Both routes get money into a pension. The difference is which taxes get rebated, who keeps the NI, and what your reported income looks like to lenders and benefits.

What you get Salary sacrifice After-tax (relief-at-source)
Income tax relief Yes - at marginal rate, automatic Basic 20% automatic. Higher/additional via Self-Assessment
Employee NI saving Yes (8% basic / 2% higher band) No
Employer NI saving Saved - employer can pass it on No (employer paid the salary in full)
Reported income (mortgage, benefits) Lower - can affect borrowing Unchanged - full salary on payslip
Restores tapered personal allowance (£100k-£125,140) Yes - sacrifice reduces adjusted net income Yes - via tax return
Flexibility to pause Limited - lifestyle events only Full - turn it on and off any time
Choice of provider Workplace scheme by default Any SIPP you like

Frequently asked

Is the UK government limiting salary sacrifice for pensions?

Yes - from April 2029, National Insurance will apply to salary-sacrificed pension contributions above £2,000 a year, for both employees and employers. This was announced at the November 2025 Autumn Budget. Income tax relief on sacrifice is unaffected. Below the £2,000 threshold, the rules stay the same. Until April 2029, current rules continue to apply with no retroactive element.

How much tax do I save with salary sacrifice?

Salary sacrifice saves both income tax and National Insurance. A basic-rate taxpayer saves 28% (20% income tax + 8% NI). A higher-rate taxpayer saves 42% (40% + 2% NI). For someone earning £100,000-£125,140, the effective saving can exceed 60% because sacrifice restores the personal allowance that tapers in this band.

Does salary sacrifice reduce my state pension?

Not in practice for most people. The new State Pension is based on having 35 qualifying years of National Insurance contributions, not on the amount paid. As long as your post-sacrifice salary stays above the Lower Earnings Limit (£6,500 for 2025/26), the year still counts toward the qualifying total. The only real risk is sacrificing so much that your earnings fall below that threshold.

Can I salary sacrifice into a SIPP?

Only if your employer agrees to pay the sacrificed amount directly into your chosen SIPP as an employer contribution. Most employers default to their workplace scheme. Smaller employers, especially, will often agree to pay into a SIPP if you ask - it costs them nothing and they save employer NI. Larger employers may decline due to admin overhead.

What is the maximum I can salary sacrifice?

Two hard limits. First, your salary after sacrifice cannot fall below the National Living Wage. Second, total pension contributions across the year (yours, your employer's, and any other) cannot exceed your annual allowance, which is £60,000 in 2025/26. The annual allowance tapers down to as low as £10,000 if your adjusted income is above £260,000.

Is salary sacrifice the same as a pension contribution?

No. A salary sacrifice agreement formally reduces your gross salary in exchange for an equivalent employer pension contribution. A normal pension contribution is paid out of your existing salary - either before income tax (net pay arrangement) or after tax with relief added back (relief-at-source). Salary sacrifice is the only mechanism that saves National Insurance for both you and your employer.

Will my employer pass on their NI saving?

Some do, some don't - it's not legally required. Since April 2025, employer NI rose to 15% on salaries above £5,000, so the saving is meaningful. If you're sacrificing £5,000, your employer saves £750 in NI. Ask. The worst they can say is no, and many will agree because it's still cheaper than refusing.

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