How much does salary sacrifice save?

Salary sacrifice saves Income Tax and National Insurance on the sacrificed amount. A basic rate taxpayer saves 28% total (20% IT + 8% NI). A higher rate taxpayer saves 42% (40% IT + 2% NI). Additional rate: 47%.

Does salary sacrifice affect my State Pension?

Salary sacrifice may reduce your National Insurance contributions record if it takes your salary below the lower earnings limit (£6,396). Most people's salaries remain well above this level even after sacrifice.

What can I salary sacrifice?

Common salary sacrifice arrangements include workplace pension, cycle to work, electric vehicle schemes, and childcare (for arrangements started before October 2018). Each requires a formal agreement with your employer reducing your contractual salary.

2026/27 · Income Tax + NI saving

Salary Sacrifice Calculator 2026/27

See exactly how much salary sacrifice saves in take-home terms — after both Income Tax and National Insurance are accounted for. Compare your position before and after.

Annual gross salary (£)

Annual salary sacrifice amount (£)

Type of sacrifice

Without sacrifice

—

✓ With sacrifice

—

IT saved—

NI saved (employee)—

Employer NI saved—

Reduction in take-home—

Effective cost of sacrifice—

Pension salary sacrifice bonus: your employer saves in employer NI on your sacrifice. Many employers pass this saving back as additional pension contribution — ask your employer or HR team whether they do this. Even if they keep 50% of the saving, you receive more in your pension than the sacrifice amount.

Maximise your pension salary sacrifice

Once your employer sets up salary sacrifice, the pension provider is where your money lands. The right SIPP or workplace pension keeps costs low and investment returns high.

Affiliate disclosure: links above may earn a commission at no cost to you.

Salary sacrifice is a formal arrangement where you agree with your employer to reduce your contractual salary in exchange for a non-cash benefit of equivalent value — most commonly a pension contribution, but also cycle to work equipment, electric vehicles, or childcare.

Because your salary is reduced before tax and NI are calculated, you save both Income Tax and National Insurance on the sacrificed amount. This is what makes it fundamentally more efficient than a personal pension contribution (which saves Income Tax but not NI).

Does it affect my mortgage application?

Potentially yes — lenders use your contractual salary (post-sacrifice) to calculate affordability. If you're planning a large mortgage soon, consider whether the salary reduction would affect your borrowing capacity before committing to a large sacrifice amount.

Is salary sacrifice the same as a personal pension?

No — they are different arrangements. A personal pension contribution comes from your net pay and claims 20% relief at source. Salary sacrifice reduces your gross salary before tax and NI, saving you National Insurance as well. Salary sacrifice is usually more efficient if your employer supports it.

Can I change my sacrifice amount?

Yes — most employers allow you to change sacrifice arrangements at set windows during the year (often annually or on a life event). Check your employer's policy before committing.

Salary Sacrifice Calculator 2026/27

Without sacrifice

✓ With sacrifice

Maximise your pension salary sacrifice

How salary sacrifice works