Salary sacrifice pension calculator
Salary sacrifice into a pension avoids income tax at 20% and employee National Insurance at 8% on the sacrificed amount, for a basic-rate taxpayer, under gov.uk's guidance on salary sacrifice and PAYE. The pension receives the full amount sacrificed, so a pound sacrificed can cost less than a pound of take-home pay.
How does salary sacrifice save me money?
Salary sacrifice means agreeing to a lower gross salary in return for the employer paying the difference into a pension. Because the money never counts as taxable pay, no income tax and no employee National Insurance is due on it, under gov.uk's guidance on salary sacrifice and PAYE. A normal pension contribution only gets the income tax back, not the National Insurance, so salary sacrifice is the more efficient route for most people.
How much does £5,000 into my pension cost me?
On a £50,000 salary, sacrificing £5,000 puts the full £5,000 into the pension. A basic-rate taxpayer saves 20% income tax and 8% National Insurance on it, about £1,400, per gov.uk's income tax rates and National Insurance rates pages. Take-home therefore falls by only an estimated £3,600. The saving is larger for higher earners, and largest of all in the £100,000 to £125,140 band where the Personal Allowance is being withdrawn.
Common questions
How does salary sacrifice save me money?
You give up part of your gross salary before tax, so you pay no income tax and no employee National Insurance on the sacrificed amount. Your pension receives the full sum, so a pound in your pension costs you less than a pound in take-home pay.
How much does £5,000 into my pension cost me?
On a £50,000 salary, sacrificing £5,000 lowers your take-home by only about £3,600, because you save £1,400 in tax and National Insurance. Every £1 in your pension costs you about £0.72.
Is salary sacrifice better than normal pension contributions?
Usually yes, because normal contributions get income tax relief but not the National Insurance saving. Salary sacrifice saves both. Check it does not push your pay below the National Minimum Wage, which is not allowed.
Sources & Rate Verification
Rates verified against official statutory guidance on 6 September 2026.