Salary Sacrifice Pension Calculator

A salary sacrifice pension works by lowering your contractual salary and having your employer pay the difference straight into your workplace pension as an employer contribution. You agree to it in writing, your employer amends your employment contract, and from that point on you’re paid a smaller salary, with the sacrificed amount going into your pension instead of your bank account.

Because HMRC taxes you on your new, lower contractual salary, you never pay Income Tax or National Insurance on the part you’ve given up. That’s the whole appeal of it over paying into a pension out of your take-home pay: the money goes in gross, before deductions, rather than net with tax relief bolted on afterwards.

Most UK employers who offer this run it through their workplace pension provider, and the sacrificed amount usually just gets added on top of whatever contribution you were already making, so your total pension saving stays the same or goes up.

Every £1 you sacrifice into your pension avoids Income Tax at your marginal rate plus 8% employee National Insurance (2% once you’re earning above £50,270). For a basic-rate taxpayer that’s roughly 28p saved on every £1 sacrificed, so a £100 monthly pension sacrifice costs closer to £72 in reduced take-home pay. Higher-rate taxpayers keep even more back, and anyone sacrificing income that sits between £100,000 and £125,140 saves extra again, because it can restore some of the Personal Allowance that gets tapered away in that band.

Your employer also stops paying 15% employer National Insurance on the sacrificed amount. Some employers reinvest part or all of that saving back into your pension on top of your own contribution, though this varies by scheme, so it’s worth checking with your HR or payroll team what your employer does.

Most workplace pensions use one of two methods to get money into your pot: relief at source, or salary sacrifice (a form of net pay arrangement). With relief at source, you contribute from your take-home pay after tax and National Insurance have already been deducted, and your pension provider claims 20% basic-rate tax relief back from HMRC and adds it to your pot automatically. Higher and additional-rate taxpayers have to claim the rest of their relief through Self Assessment or by contacting HMRC directly, and it isn’t always claimed.

Salary sacrifice skips all of that. Your pension contribution is deducted from your gross pay before tax and National Insurance are worked out, so the relief happens automatically and immediately, at your full marginal rate, and you also save National Insurance, which relief at source never gives you. For most employees, that makes salary sacrifice the more valuable option pound for pound, provided your employer offers it and a lower contractual salary doesn’t cause you a problem elsewhere, such as with a mortgage application.

Contributions made through salary sacrifice still count towards your pension Annual Allowance, which is £60,000 for most people in 2026/27. That limit covers everything going into your pension in a tax year: your sacrificed salary, any contribution your employer was already making, and anything else you pay in separately.

If your adjusted income is over £260,000 a year (and your threshold income is over £200,000), the Annual Allowance tapers down by £1 for every £2 above that, to a floor of £10,000. A separate, lower Money Purchase Annual Allowance of £10,000 applies if you’ve already started flexibly drawing money from a defined contribution pension. Contributions over your allowance can trigger an Annual Allowance tax charge, so if you’re a high earner sacrificing a large amount, it’s worth checking your total pension contributions against your allowance rather than relying on this figure alone.

This salary sacrifice pension calculator assumes:

• A single, stable annual salary with no other income, bonuses, or benefits in kind.
• The full amount you sacrifice is paid into your pension as an employer contribution and is fully exempt from Income Tax and employee National Insurance, which is how genuine pension salary sacrifice arrangements work.
• National Insurance and Income Tax are calculated on an annualised basis, matching a salary paid evenly across the year. Real payroll NI is worked out non-cumulatively per pay period, which can cause small, pence-level differences for irregular pay.
• The Annual Allowance warning only checks the sacrifice amount entered here against the standard £60,000 allowance. It cannot account for other pension contributions, a tapered allowance, or the Money Purchase Annual Allowance, since those need income and pension-access details this tool doesn’t collect.
• All figures are rounded to the nearest penny.

For a broader look at salary sacrifice beyond pensions, including Cycle to Work and other qualifying benefits, see the general UK Salary Sacrifice Calculator. Full source citations for every rate and threshold used are also listed on the About & methodology page.