UK Salary Sacrifice & Pension Tax Relief Calculator 2026/27
See what a pension contribution really costs you after tax and National Insurance relief — salary sacrifice vs relief at source — and how much employer NI it frees up.
| Your contribution (gross) | — |
|---|---|
| Take-home with NO pension contribution | — |
| Take-home with salary sacrifice | — |
| Real cost to you of the contribution (sacrifice) | — |
| Tax + NI relief under sacrifice | — |
| Take-home with relief at source | — |
| Real cost to you (alternative) | — |
| Employer NI saved by sacrifice | — |
| Total going into the pension (you + employer + NI share) | — |
| Sacrifice advantage per year | — |
In short
With salary sacrifice a UK pension contribution saves income tax and National Insurance (8% up to £50,270, 2% above) and the employer saves 15% employer NI, so £100 into the pension costs a basic-rate taxpayer about £72 and a higher-rate taxpayer about £58; relief at source gives the same tax relief but no NI saving, and higher-rate taxpayers must reclaim the extra 20% via Self Assessment.
Who this is for: UK employees deciding how to contribute to a pension and employers explaining salary sacrifice.
Salary sacrifice vs relief at source vs net pay
- Salary sacrifice: you give up part of your salary and the employer pays it into your pension. Because your salary is lower, you pay less income tax and less National Insurance (8% up to £50,270, 2% above), and the employer saves 15% employer NI on the sacrificed amount — which it may keep or add to your pension. A basic-rate taxpayer's £100 contribution costs £72; a higher-rate taxpayer's costs £58.
- Relief at source: you pay 80% from net pay, the provider claims 20% from HMRC, and higher/additional-rate taxpayers reclaim the extra 20–25% through Self Assessment (often forgotten). No NI saving, so £100 costs £80 or £60.
- Net pay arrangement: the contribution comes off gross pay before tax, so full tax relief is automatic, but NI is still charged on the full salary.
Limits: the annual allowance is £60,000 (tapering to £10,000 for adjusted income above £260,000), with unused allowance from the previous three years available. Sacrifice cannot take pay below the National Minimum Wage.
Assumptions
- Take-home computed with 2026/27 income tax (PA taper included) and employee NI from the UK rules file.
- Sacrifice: tax and NI on salary − contribution; relief at source: 80% paid net plus higher-rate relief from extending the basic band; net pay: tax on reduced salary, NI on full salary.
- Employer NI saving = 15% × contribution; the share passed on is added to the pot.
Worked example
Contribution £4,400. Salary sacrifice: income tax falls by £1,760 (40% band) and NI by £88 (2% above £50,270 and 8% on the slice below), so the £4,400 costs about £2,552 of take-home.
Relief at source: £3,520 from net pay, then £880 reclaimed → cost £2,640. Sacrifice is £88 a year better for you and saves the employer £660 of NI; if the employer passed that on, your pot would get £6,710 a year instead of £6,050.
Frequently asked questions
Does salary sacrifice affect my State Pension?
Not as long as your reduced salary stays above the £6,500 lower earnings limit — you still get a qualifying year. Employers normally cap sacrifice to keep pay above the minimum wage.
Does it reduce my mortgage borrowing?
Lenders see the lower salary on payslips; most accept a letter confirming the pre-sacrifice 'reference salary', but check before applying.
Is there a maximum I can sacrifice?
Down to the National Minimum Wage, and within the £60,000 annual allowance (including employer contributions).
Can I do salary sacrifice if I'm self-employed?
No — it is an employer arrangement. Self-employed people use relief-at-source personal pensions or SIPPs.
How much does salary sacrifice save?
Employee NI of 8% (2% above £50,270) on the contribution, on top of income tax relief — plus 15% employer NI that some employers pass on.
Is salary sacrifice better than relief at source?
Usually, because of the NI saving and automatic higher-rate relief; the downsides are a lower contractual salary and no option below the minimum wage.
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