Salary Sacrifice Calculator

Salary sacrifice is an arrangement where you contractually reduce your gross salary in exchange for a non-cash benefit, most commonly increased pension contributions. Because your taxable salary is lower, you pay less income tax and National Insurance.

For a basic-rate taxpayer sacrificing £100: you save £20 income tax + £8 NI = £28, so the pension contribution effectively costs you only £72. Higher-rate taxpayers save even more — £40 tax + £8 NI = £48 saved per £100 sacrificed.

Your employer also saves 15% employer NI on the sacrificed amount. Some employers pass part of this saving back to you as additional pension contributions. The calculator shows savings for both employee and employer.

How salary sacrifice works mechanically. You agree with your employer to give up part of your gross salary in exchange for a non-cash benefit (pension, cycle scheme, EV, childcare voucher pre-Oct 2018). The sacrificed amount is removed BEFORE income tax AND National Insurance are calculated. For £100 sacrificed into pension: basic-rate saves £20 income tax + £8 employee NI = £28 net cost reduction (vs £20 with RAS pension). Higher-rate: £40 + £2 = £42 saving per £100.

Common salary sacrifice schemes in 2026. Pension (most popular — typically 5% of salary up to 100%); Cycle-to-work scheme (£1,000-£3,000, repaid over 12-18 months); Electric Vehicle (BiK rate 2% to 7% to 2030 — extremely tax-efficient); Workplace Nursery (uncapped for direct provision); Annual Leave Purchase (buying extra holiday); Technology (limited tax advantage post-2017). Childcare Voucher schemes closed to new joiners October 2018 — replaced by Tax-Free Childcare.

Watch out: the minimum wage and benefit traps. Salary sacrifice cannot take your remaining pay below National Minimum Wage (£12.71/hr in 2026 for 21+). Sacrifice also reduces 'qualifying earnings' for State Pension accrual, Statutory Maternity Pay, mortgage affordability assessments, and some benefits. For employees near these thresholds, sacrificing into pension is usually still net positive (better long-term income) but check the specific impact on Maternity Pay and SMP calculations.

Employer NI savings — the win-win. When you sacrifice £1,000 into pension, your employer saves 15% NI (£150) and 0.5% Apprenticeship Levy if applicable. Many employers share this saving back as ADDITIONAL pension contribution — turning your £1,000 sacrifice into £1,150-£1,155 in the pension. Always ask your HR/payroll team if your scheme is 'NI passback'. If it isn't, suggest implementing one — it's free money for employees with no extra cost to the employer beyond admin.