Salary Sacrifice Calculator
England, Wales & Northern Ireland · 2025/26 tax year
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How salary sacrifice actually works
You earn £50,000. You pay income tax and National Insurance on the full amount. Then you put some of what's left into your pension. HMRC adds basic rate tax relief — but you still lose the NI.
Your employer agrees to pay you £45,000 and put £5,000 directly into your pension. You officially never earned the £5,000 — so you never pay tax or NI on it. That's the extra saving.
Frequently Asked Questions
How much does the typical person save?
It depends on your tax rate. Basic rate taxpayers (£12,571–£50,270) save approximately 28p for every £1 contributed — 20p in income tax and 8p in National Insurance. Higher rate taxpayers (above £50,270) save approximately 42p per £1 — 40p in income tax and 2p in NI.
Someone earning £45,000 contributing 5% (£2,250/year) saves around £630 per year through salary sacrifice compared to making the same contribution from take-home pay.
Is salary sacrifice always better than a personal pension?
For most employees, yes. A personal pension contribution gets income tax relief added automatically, but you still paid NI on the money before it went in. Salary sacrifice avoids both tax and NI, making it more efficient in nearly every case.
The one exception: if salary sacrifice would push your salary below the National Minimum Wage, your employer cannot legally offer it. This mainly affects lower earners working part-time.
Does salary sacrifice affect my student loan repayments?
Yes — and this is often overlooked. Student loan repayments are calculated on your "pensionable pay" which is reduced when you salary sacrifice. For Plan 2 loans, you repay 9% of everything above £27,295. Reducing your salary by £3,000 reduces your annual repayment by £270.
This is included in our calculator — tick the student loan option above to see the full picture.
Does salary sacrifice affect my mortgage borrowing power?
Potentially, yes. Most lenders base mortgage affordability on your gross salary. If your official salary is reduced through sacrifice, some lenders may offer a smaller mortgage. However, many lenders — particularly those experienced with public sector workers — understand salary sacrifice and will use your pre-sacrifice salary for affordability calculations. Always tell your mortgage broker if you have a salary sacrifice arrangement.
Can I change my salary sacrifice amount?
Usually yes, but there are rules. Most employers allow changes at specific points — often annually, or at life events such as changing jobs, marriage, or having a child. The exact rules depend on your employer's scheme. Check your employee handbook or ask HR.
What about the employer's NI saving?
When you sacrifice salary, your employer also saves National Insurance — currently 13.8% on the sacrificed amount. Some employers pass this saving back to employees as an additional pension contribution. It's worth asking, as it can meaningfully increase your pension without costing either party extra. Our calculator shows the employer's NI saving so you know what to ask for.
Is this tool regulated financial advice?
No. This calculator provides information to help you understand how salary sacrifice works — it is not personalised financial advice. The calculations are based on published HMRC rates for 2025/26 and apply to England, Wales, and Northern Ireland only (Scottish income tax rates differ). Always speak to an Independent Financial Adviser before making significant pension decisions.