Salary Sacrifice Calculator, 2026/27

How this is calculated

Salary sacrifice works by permanently reducing your contractual salary in exchange for a non-cash benefit, most commonly an equivalent employer pension contribution. Because the sacrificed amount never appears as salary, it escapes income tax and both employee and employer National Insurance entirely, unlike a normal net pension contribution which only avoids income tax and needs a basic rate top-up from HMRC.

This calculator compares your income tax and employee NIC before and after the sacrifice using the 2026/27 rates and bands, then separately works out the employer NIC saving at 15.0%. Many employers pass some or all of this employer saving into your pension as an extra contribution, which is shown as a potential pension boost.

Why salary sacrifice beats a normal pension contribution

A normal net pension contribution is taken from your pay after tax, with basic rate relief added back by the pension provider and higher or additional rate relief claimed separately through self-assessment, which many people forget to do. Salary sacrifice avoids this administrative step entirely because the contribution never counted as taxable pay in the first place, so the full tax and NIC saving happens automatically at source.

The main trade-off is that your reduced salary may affect other calculations based on gross pay, such as mortgage affordability assessments, statutory maternity pay, and life insurance cover linked to salary multiples, so it is worth checking these before committing to a large sacrifice.

Limits and things to check

Your sacrificed salary must not take your pay below the National Minimum Wage, and total pension contributions, including the employer's own contribution and any employer NIC passed on, must stay within the £60,000 annual allowance to avoid a tax charge, which tapers down for adjusted incomes above £200,000.

Salary sacrifice is not limited to pensions; it is also commonly used for Cycle to Work schemes, electric car leasing and childcare vouchers for those still eligible, each with its own specific tax treatment.

Does salary sacrifice reduce my state pension?

It can slightly reduce your state pension entitlement if it takes your salary below the lower earnings limit, though for most earners well above that threshold it has no effect on qualifying years while still building your workplace pension pot faster.

Will my employer pass on their NIC saving?

Not automatically; it depends entirely on your employer's policy. Some employers add their NIC saving into your pension pot as an extra contribution, while others keep it as a straightforward cost saving.

Can I sacrifice as much salary as I like into my pension?

No, your resulting salary must stay above the National Minimum Wage, and your total pension contributions must stay within the £60,000 annual allowance to avoid a tax charge on the excess.

Does salary sacrifice affect a mortgage application?

It can, because lenders usually assess affordability on your post-sacrifice salary shown on payslips, so a large sacrifice could reduce the amount you are able to borrow even though your take-home pay after tax may not fall by much.