How does salary sacrifice save National Insurance?

Salary sacrifice reduces your gross pay before both Income Tax and employee NI are calculated, so you avoid 8% (or 2%) NI on the sacrificed amount as well as Income Tax. Ordinary pension contributions only save Income Tax, not NI.

How much does my take-home pay actually fall?

Less than the amount sacrificed. For a basic-rate taxpayer, putting £5,000 into a pension by sacrifice cuts take-home by about £3,600, because £1,000 of Income Tax and £400 of NI are saved — yet the full £5,000 lands in the pension.

Is the whole sacrificed amount paid into my pension?

Yes. The full amount you sacrifice goes into the pension. Many employers also add the employer NI they save (13.8%) to your pot, which this calculator does not include, so your real benefit can be even higher.

Are there limits on salary sacrifice?

Your salary cannot be sacrificed below the National Minimum Wage, and pension contributions are capped by the £60,000 annual allowance (tapered for high earners). Sacrificing also reduces the salary used for mortgages and some benefits.

UK Salary Sacrifice Pension Calculator

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Pension salary sacrifice swaps part of your gross salary for an employer pension contribution, cutting both Income Tax and National Insurance. This calculator recomputes your 2025/26 tax and NI before and after the sacrifice.

How it works

The sacrificed amount is deducted from gross pay before any tax or NI is calculated. Income Tax is recomputed on the lower salary using the £12,570 allowance and 20%/40% bands, and employee NI is recomputed using the 8% rate between £12,570 and £50,270 (2% above).

saving = (tax on full salary − tax on reduced salary)
       + (NI on full salary − NI on reduced salary)
net pay drop = sacrifice − saving

The full sacrificed amount enters your pension, while your take-home pay falls only by the net amount.

Example

On a £45,000 salary sacrificing £5,000, you avoid 20% Income Tax (£1,000) and 8% NI (£400) on that £5,000 — a £1,400 saving. The full £5,000 goes into the pension, yet your take-home pay drops by only £3,600.

Notes

Estimate only, not financial advice. Models 2025/26 England/Wales/NI Income Tax bands and Class 1 employee NI. Many employers also pass on the 13.8% employer NI they save, boosting your pot further — not shown here. Salary cannot be sacrificed below minimum wage, and the £60,000 annual allowance still applies. Verify with your employer and at gov.uk.