UK Finance Planning

Salary sacrifice calculator (2026/27)

Choose a pension contribution method to see how it changes your tax, National Insurance and take-home pay for the same headline salary.

What salary sacrifice is

Salary sacrifice is a formal agreement to give up part of your contractual salary in return for an employer contribution — most commonly into a pension. Because your gross salary is genuinely reduced, both Income Tax and employee National Insurance are calculated on the lower figure.

Sacrifice vs net pay vs relief at source

Net pay arrangements deduct your contribution from pay before Income Tax but after National Insurance. Relief at source deducts it from net pay, and the pension scheme claims 20% back from HMRC — higher and additional rate taxpayers must claim the rest through self assessment.

  • Salary sacrifice — saves Income Tax and National Insurance.
  • Net pay — saves Income Tax at your marginal rate, no NI saving.
  • Relief at source — basic rate reclaimed by the scheme; extra relief claimed separately.

Things to weigh up before sacrificing salary

A reduced gross salary can affect mortgage affordability assessments, statutory maternity or paternity pay, life cover based on salary multiples, and entitlement to some earnings-related benefits. Sacrifice also cannot take your pay below the National Minimum Wage.

Annual allowance

Total pension contributions are limited by the annual allowance, which tapers for very high earners. Contributions above the allowance can trigger a tax charge, so high earners should check their position before increasing contributions.

Methodology, assumptions and limitations

  • 2026/27 UK rates, bands and thresholds, verified against primary sources on 21 August 2026.
  • Pay is treated as even across all 12 months (cumulative PAYE), so a mid-year pay change will not match exactly.
  • Class 1 employee National Insurance only — no Class 1A, Class 2 or Class 4 self-employment NI.
  • Scotland is detected from an "S" prefix on the tax code; other UK nations use the rest-of-UK bands.
  • Results are estimates for comparison and education, not a payroll calculation or a tax return.
  • Benefits in kind, company cars, taxable expenses and P11D adjustments are not modelled.
  • Week 1 / month 1 and emergency tax code operation is not modelled — codes are treated cumulatively.
  • This is not regulated financial advice and does not take your personal circumstances into account.

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.

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