Salary Sacrifice Calculator
See what a pension salary sacrifice really costs your take-home pay, how much tax and National Insurance it saves, and exactly how much to sacrifice to get back under £100,000.
Income tax at the rates for England, Wales and Northern Ireland; National Insurance is UK-wide. Assumes no other income.
From April 2029 only the first £2,000 a year of pension salary sacrifice is free of National Insurance.
How salary sacrifice works
With salary sacrifice you agree to a lower salary and your employer pays the difference straight into your pension. Because the sacrificed pay is no longer salary, you pay no income tax and no employee National Insurance on it, and your employer doesn't pay its 15% NI on it either. That is why it is cheaper than paying into a pension out of your net pay.
The effect on your take-home is always smaller than the amount you sacrifice. On £60,000, sacrificing £3,000 a year costs your take-home only £1,740 - 58p for every £1 that reaches your pension - because you save £1,200 of income tax and £60 of NI. On £40,000, a £2,000 sacrifice costs £1,440, or 72p per £1.
- Your contract changes: gov.uk says the employer must alter your contract each time you opt in or out.
- Your gross pay, and therefore your adjusted net income, falls by the amount you sacrifice - which is what matters at £100,000.
- Pension contributions count towards the £60,000 annual allowance.
The £100,000 trap, and why sacrifice is the way out
Above £100,000 your £12,570 personal allowance is withdrawn at £1 for every £2 you earn, until it is gone at £125,140. In that band each extra £1 costs 40% income tax, another 20% through the lost allowance and 2% NI: an effective 62% marginal rate. On £110,000 your allowance has already shrunk to £7,570.
Salary sacrifice reverses it pound for pound. Sacrificing £10,000 of a £110,000 salary puts £10,000 into your pension but costs your take-home only £3,800: you save £6,000 of income tax and £200 of NI, your personal allowance is back to £12,570, and each £1 into the pension costs 38p. Your employer saves £1,500 of NI, which some employers add to your pension.
Sacrifice needed to get to £100,000
| Salary | Sacrifice to reach £100,000 | Cost to take-home | Cost per £1 | Income tax saved |
|---|---|---|---|---|
| £105,000 | £5,000 | £1,900 | 38p | £3,000 |
| £110,000 | £10,000 | £3,800 | 38p | £6,000 |
| £115,000 | £15,000 | £5,700 | 38p | £9,000 |
| £120,000 | £20,000 | £7,600 | 38p | £12,000 |
| £125,000 | £25,000 | £9,500 | 38p | £15,000 |
| £130,000 | £30,000 | £12,129 | 40p | £17,271 |
Above £125,140 the allowance is gone entirely, so the top slice is taxed at 45% plus 2% NI; sacrificing from there still saves 47p in every pound until you are back inside the 62% band.
Tax-Free Childcare and the £100,000 cliff
The £100,000 line is also a cliff for parents. You can't get Tax-Free Childcare if you or your partner expect adjusted net income over £100,000 in the tax year - and the top-up is worth up to £2,000 per child a year (£4,000 for a disabled child). The same £100,000 limit applies to the free childcare hours for working parents. Because salary sacrifice lowers adjusted net income, it can bring eligibility back; the calculator shows whether your figures clear the line.
What £5,000 of salary sacrifice costs at different salaries
| Salary | Cost to take-home | Cost per £1 | Income tax saved | NI saved | Employer NI saved |
|---|---|---|---|---|---|
| £40,000 | £3,600 | 72p | £1,000 | £400 | £750 |
| £50,000 | £3,600 | 72p | £1,000 | £400 | £750 |
| £60,000 | £2,900 | 58p | £2,000 | £100 | £750 |
| £80,000 | £2,900 | 58p | £2,000 | £100 | £750 |
| £100,000 | £2,900 | 58p | £2,000 | £100 | £750 |
| £110,000 | £1,900 | 38p | £3,000 | £100 | £750 |
| £125,000 | £1,900 | 38p | £3,000 | £100 | £750 |
| £150,000 | £2,650 | 53p | £2,250 | £100 | £750 |
The pattern follows your marginal rate: basic-rate taxpayers pay about 72p per £1, higher-rate taxpayers about 58p, and anyone sacrificing out of the £100,000-£125,140 band as little as 38p.
What changes in April 2029
From 6 April 2029 only the first £2,000 a year of pension contributions made through salary sacrifice will be exempt from National Insurance. You can still sacrifice more, and the income tax relief is unchanged, but employee and employer NI will be charged on the excess. The government estimates that 56% of employees currently making pension contributions through salary sacrifice will be unaffected.
At today's rates (thresholds are frozen until April 2031): on £60,000, a £3,000 sacrifice would cost £1,760 instead of £1,740; a £6,000 sacrifice £3,560 instead of £3,480. On £110,000 with £10,000 sacrificed, the cost rises from £3,800 to £3,960 and your employer's NI saving falls from £1,500 to £300. The income tax side - the part that fixes the £100,000 trap - does not change.
Limits and things to check first
- Annual allowance. £60,000 a year across all your pension saving. It tapers by £1 for every £2 of adjusted income over £260,000 (if threshold income is over £200,000), to a minimum of £10,000. Unused allowance can often be carried forward from the previous 3 tax years.
- Minimum wage. A salary sacrifice arrangement must not reduce your cash earnings below the National Minimum Wage.
- Statutory pay and benefits. A lower salary can reduce statutory payments such as maternity pay - or remove entitlement below the lower earnings limit - and can affect earnings-related and contribution-based benefits.
- Anything based on salary. Some employers base life cover, pay rises or mortgage references on the pre-sacrifice figure; others don't. Ask.
Frequently asked questions
Does salary sacrifice save National Insurance?
Yes, today it does. The sacrificed pay is no longer salary, so you pay neither income tax nor employee National Insurance on it, and your employer saves its 15% NI too. From 6 April 2029 only the first £2,000 a year of pension salary sacrifice will be free of NI; above that, NI is charged as on other employee pension contributions. Income tax relief is unchanged.
How much should I sacrifice to get under £100,000?
Enough to bring your adjusted net income down to £100,000 - roughly your salary minus £100,000 if you have no other income. On £110,000 that is £10,000, which costs your take-home £3,800, or 38p for every £1 that reaches your pension, and restores your full £12,570 personal allowance.
Why is the tax saving so large between £100,000 and £125,140?
Because in that band your personal allowance is withdrawn at £1 for every £2 you earn, so each extra £1 costs 40% income tax plus another 20% from the lost allowance, plus 2% NI - a 62% marginal rate. Sacrificing pay in that band recovers all of it.
Will salary sacrifice get my Tax-Free Childcare back?
It can. You can't get Tax-Free Childcare if you or your partner expect adjusted net income over £100,000, and salary sacrifice reduces adjusted net income. Tax-Free Childcare is worth up to £2,000 per child a year (£4,000 if the child is disabled).
Is there a limit to how much I can put into my pension?
The annual allowance is £60,000 across all your pension saving, and it is tapered (down to a minimum of £10,000) if your threshold income is over £200,000 and your adjusted income over £260,000. Unused allowance can often be carried forward from the previous 3 tax years.
Can salary sacrifice take my pay below the minimum wage?
No. gov.uk is explicit that a salary sacrifice arrangement must not reduce an employee's cash earnings below the National Minimum Wage rates.
Does salary sacrifice affect maternity pay or benefits?
It can. Statutory payments are based on your earnings, so a lower salary can reduce them - or remove entitlement if your average weekly earnings fall below the lower earnings limit - and it can affect earnings-related and contribution-based benefits. Check with your employer.
Does this calculator work in Scotland?
The National Insurance side does (NI is UK-wide), but the income tax figures use the rates for England, Wales and Northern Ireland. Scottish income tax has different bands, so the income tax saving will differ.
Related
Estimates for 2026/27 for an employee with no other income, using HMRC rates for England, Wales and Northern Ireland. Not financial advice.
Sources
- Salary sacrifice for employers (NMW floor, statutory pay, contract changes): https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye
- Changes to salary sacrifice for pensions from April 2029: https://www.gov.uk/government/publications/changes-to-salary-sacrifice-for-pensions-from-april-2029/changes-to-salary-sacrifice-for-pensions-from-april-2029
- Rates and thresholds for employers 2026 to 2027 (NI rates, secondary threshold): https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2026-to-2027
- Income Tax rates and Personal Allowances: https://www.gov.uk/income-tax-rates
- Thresholds maintained until 5 April 2031: https://www.gov.uk/government/publications/maintaining-income-tax-and-equivalent-national-insurance-contributions-thresholds-until-5-april-2031
- Tax-Free Childcare: https://www.gov.uk/tax-free-childcare
- Tax-Free Childcare eligibility (adjusted net income over £100,000): https://www.gov.uk/tax-free-childcare/check-if-youre-eligible
- Free childcare for working parents: eligibility (adjusted net income over £100,000): https://www.gov.uk/free-childcare-if-working/check-youre-eligible
- Pension annual allowance: https://www.gov.uk/tax-on-your-private-pension/annual-allowance
- Tapered annual allowance: https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance