Salary sacrifice explained
Salary sacrifice means agreeing to a lower contractual salary in exchange for a non-cash benefit, most often an employer pension contribution. Because your gross pay falls, you pay less Income Tax and less National Insurance — up to 8% NI saved on top of your tax rate in 2026/27.
Compare salary sacrifice with other methods
How the saving works
A basic-rate taxpayer sacrificing £100 typically saves £28 in tax and NI, so take-home pay falls by about £72. Above £50,270 the NI saving is 2% instead.
Compared with other pension methods
Net pay arrangements save Income Tax but not NI. Relief at source adds basic-rate relief to the pension, and higher-rate taxpayers claim the rest through Self Assessment.
Considerations to explore
Sacrifice cannot take pay below the National Minimum Wage. A lower contractual salary may also affect mortgage applications, life cover linked to salary and some state benefits.
Methodology, assumptions and limitations
- Figures are the 2026/27 rates held in the same tax settings that power every calculator on this site.
- Assumes a standard 1257L tax code unless stated otherwise.
- General educational information, not regulated financial or tax advice.
- Your own position depends on your full circumstances — check GOV.UK or HMRC for your case.
- GOV.UK — Salary sacrifice and the effects on PAYE
- GOV.UK — Rates and thresholds for employers 2026 to 2027
UK Finance Planning provides calculation and planning tools for education and comparison. It is not a financial adviser, is not authorised by the Financial Conduct Authority, and is unconnected to any similarly named advice firm. All results are estimates.
Related tools and guides
- Salary sacrifice calculator — Compare pension methods.
- Take-home pay calculator — Monthly net pay.
- The £100k tax trap — Personal Allowance taper explained.
- Child Benefit tax charge — How the charge works above the threshold.