Salary Sacrifice Pension Calculator
How it works
You agree with your employer to give up part of your gross salary in exchange for a higher pension contribution. Because the sacrificed amount never hits your payslip, you avoid both Income Tax AND National Insurance on it. Many employers also pass on the 15% Employer NI saving they make.
Worked example
Higher-rate taxpayer earning £60k sacrifices £5,000.
- Income Tax saved: £2,000 (40%)
- NI saved: £100 (2%)
- Net cost: £2,900
- If employer passes on NI: £5,750 into pension for £2,900 net = 98% uplift
Who should use this
- •Higher-rate taxpayers maximising pension contributions
- •Anyone caught in the £100k–£125k 60% trap
- •Employees with generous workplace pension matching
- •People wanting to reduce taxable income for child benefit/other thresholds
Common mistakes
- ×Sacrificing below the personal allowance (no tax saving)
- ×Forgetting the £60,000 Annual Allowance
- ×Reducing salary below NMW (not allowed)
- ×Not realising it can affect mortgage borrowing and statutory maternity pay
Frequently asked questions
Is salary sacrifice better than personal pension contributions?▾
Usually yes — you save NI as well as tax, and many employers add their NI saving on top. Personal contributions only get tax relief.
Does it affect my State Pension?▾
Only if it pushes your earnings below the Lower Earnings Limit (£6,396) — unlikely for most.
What about my mortgage application?▾
Lenders use your post-sacrifice salary, which can reduce affordability. Some lenders gross it back up — ask a broker.
Can I sacrifice into other things?▾
Yes — cycle to work, EV cars, childcare vouchers (closed to new entrants), holiday buying. Pensions are usually the most valuable.
What is the Annual Allowance?▾
£60,000 of total contributions per year. Tapered down to £10,000 for very high earners with adjusted income over £260,000.
Is salary sacrifice irreversible?▾
Usually it can only be changed at agreed lifestyle events (marriage, baby, etc.) or scheme renewal — check your scheme rules.