How Salary Sacrifice Works

With salary sacrifice, you give up part of your gross salary before tax. Your employer puts this into your pension (or another scheme). Because you're paid less on paper, you pay less income tax AND less National Insurance.

For a 40% taxpayer sacrificing £300/month: instead of costing £300, it only reduces your take home by about £174. The government effectively pays £126 of your pension contribution.

What Can You Sacrifice For?

Common salary sacrifice arrangements include workplace pensions, Cycle to Work schemes, electric vehicle (EV) salary sacrifice, childcare vouchers (legacy), and ultra-low emission company cars.

Use our salary calculator to model different scenarios, or check the pension calculator to see long-term growth.

What This Calculator Does

This calculator compares your take-home pay with and without salary sacrifice, showing the tax and NI savings you gain by reducing your gross salary in exchange for benefits. It is designed for employees considering salary sacrifice arrangements for pension, cycle to work, or childcare vouchers.

How the Calculation Works

When you sacrifice salary for pension contributions, you avoid both income tax and National Insurance on the sacrificed amount. The calculator shows the total saving versus making the same contribution from net pay.

Common Scenarios

Sacrificing £500/month into your pension on a £40,000 salary saves you roughly £160/month compared to contributing from net pay. For higher-rate taxpayers, the saving is even greater at around £210/month. Your employer also saves on Employer NI.

Related Calculators

You might also find these useful: Pension, Pay Rise, Employer Cost. Or use our main salary calculator for a complete take-home pay breakdown.