Salary Sacrifice Calculator 2026/27

Salary Sacrifice Calculator

✓ Verified for 2026/27

Sacrifice Scheme Details

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A salary sacrifice arrangement reduces your gross salary in exchange for non-cash benefits (e.g. pension contributions, cycle-to-work schemes, low-emission company cars), reducing the amount of Tax and NI you pay.

New Take-Home Pay
£31,600
annual take-home
Actual Net Cost
£3,400
per month
Tax & NI Saved
£1,600
total annual savings
Funding from Relief
32.0%
paid by tax relief

Sacrifice Savings Breakdown

Gross Sacrifice Amount £5,000
Income Tax Saved £1,000
NI Saved £400
Net Cost to You £3,600
Net Cost 72%
Tax Saved 20%
NI Saved 8%

Before Sacrifice

Gross Salary: £45,000
Tax & NI Paid: £10,000
Take-Home Pay: £35,000

After Sacrifice

New Gross Salary: £40,000
Tax & NI Paid: £8,400
Take-Home Pay: £31,600

How We Calculated This

  1. Enter Pension Sacrifice details: Specify salary sacrifice contribution percentage or flat rate.
  2. Calculate pre-tax deduction: Reduce the gross taxable salary by the contribution amount.
  3. Compute new lower taxes: Recalculate Income Tax and employee National Insurance on the lower taxable figure.
  4. Determine Savings: Compare the net pay before and after the contribution to find the true net cost and tax/NI savings.

Real-World Examples

Example 1: 5% Salary Sacrifice on £40,000 Salary

Shows how the tax/NI savings reduce the true cost of saving for retirement.

Gross salary: £40,000
Pension contribution (5%): £2,000
New taxable salary: £38,000

Income Tax savings (20% of £2,000): £400
National Insurance savings (8% of £2,000): £160
Total Tax + NI saved: £560

Net cost to employee: £2,000 - £560 = £1,440

Frequently Asked Questions

What is a salary sacrifice pension arrangement?

Salary sacrifice is an agreement where you agree to lower your gross salary in exchange for your employer making equivalent pension contributions. This saves you both Income Tax and National Insurance.

What is the UK pension contribution tax-free allowance?

The annual allowance is capped at £60,000 per tax year or 100% of your earnings, whichever is lower, unless tapered for high earners.

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About This Calculator

This calculator uses the latest HMRC rates for the 2026/27 tax year. For illustrative purposes only — always consult a qualified tax adviser for formal advice.