See how much Income Tax and National Insurance you save by paying into your pension through salary sacrifice in 2026/27. On a £40,000 salary, sacrificing 5% puts £2,000 into your pension but reduces your take-home pay by only £1,440, because you save £400 in tax and £160 in National Insurance.
Salary Sacrifice Pension Calculator
Income Tax and National Insurance saved in 2026/27 · Updated 12 October 2026
- Paid into your pension
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- Income Tax saved
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- Employee NI saved
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- Cost of each £1 in your pension
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- Take-home pay before (year / month)
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- Take-home pay after (year / month)
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- Employer NI saved
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Uses 2026/27 annual thresholds and tax code 1257L, with no student loan or other deductions. Your payslips may differ slightly because payroll works per pay period.
How salary sacrifice works
You agree to a lower salary and your employer pays the difference straight into your pension. Because your salary is lower, you pay less Income Tax and less employee National Insurance, and your employer pays less employer National Insurance. Some employers add their NI saving to your pension too.
| Rate on the sacrificed pay | 2026/27 threshold | |
|---|---|---|
| Income Tax (basic / higher / additional) | 20% / 40% / 45% | Personal Allowance £12,570 |
| Employee NI (main rate) | 8% | £12,570 to £50,270 |
| Employee NI (above upper limit) | 2% | Over £50,270 |
| Employer NI | 15% | Over £5,000 |
Examples for 2026/27
| Salary | Sacrifice | Tax saved | Employee NI saved | Drop in take-home pay |
|---|---|---|---|---|
| £30,000 | £1,500 (5%) | £300 | £120 | £1,080 |
| £40,000 | £2,000 (5%) | £400 | £160 | £1,440 |
| £60,000 | £6,000 (10%) | £2,400 | £120 | £3,480 |
| £110,000 | £10,000 | £6,000 | £200 | £3,800 |
The £110,000 example shows why salary sacrifice is popular with higher earners. Bringing income down to £100,000 restores the £5,000 of Personal Allowance that was being withdrawn, so the effective tax relief on that slice is 60%, plus 2% National Insurance.
Things to check before you sign up
- Your salary after the sacrifice can’t fall below the National Minimum Wage.
- A lower salary can reduce how much a lender will offer on a mortgage, and can affect earnings-related benefits such as Statutory Maternity Pay and life cover based on salary.
- Total pension contributions above the £60,000 annual allowance may be taxed. The allowance is tapered for very high incomes, down to £10,000.
- From 6 April 2029, only the first £2,000 a year of salary-sacrificed pension contributions will be free of National Insurance. Above that, both employee and employer NI will apply. Income tax relief is not affected.
FAQs
Is salary sacrifice better than a normal pension contribution?
With a normal workplace pension (net pay or relief at source), you get Income Tax relief but still pay National Insurance on the money. Salary sacrifice also saves NI, so the same pension contribution costs you 8% less (2% above £50,270).
Does this work in Scotland?
Yes. Choose Scotland in the calculator to use the Scottish Income Tax bands for 2026/27. National Insurance is the same across the UK.
Related calculators
- Take-Home Pay Calculator 2026/27Your full payslip after tax and NI
- Dividend Tax CalculatorNew 10.75% and 35.75% rates
Sources
- GOV.UK: Rates and thresholds for employers 2026 to 2027
- legislation.gov.uk: National Insurance Contributions (Employer Pensions Contributions) Act 2026, section 1
- GOV.UK: Work out your tapered annual allowance
- Scottish Government: Scottish Income Tax 2026 to 2027
Figures current as of 12 October 2026
Each formula is checked against a separate test sheet with at least three worked examples. Results are estimates based on the numbers you enter and the published rules; your actual figures may differ. This is general information, not financial or tax advice.
Spotted a mistake? Contact us and we will fix it and update the date above.