Pension salary sacrifice swaps part of your gross pay for an employer pension contribution, cutting both Income Tax and National Insurance. Enter your salary and contribution to see the saving and the real cost to your take-home.
Pension · per year
With a normal pension contribution from net pay, you get Income Tax relief but still pay National Insurance on the money first. Salary sacrifice works differently: you formally give up part of your gross salary, and your employer pays it into your pension instead. Because the cash never counts as your salary, you save both Income Tax and employee NI on it — making it the most efficient way to pay into a pension for most employees.
| £100 into pension via… | Costs a basic-rate earner | Costs a higher-rate earner |
|---|---|---|
| Net pay (no relief at source issues) | £80 | £60 |
| Salary sacrifice | £72 | £58 |
Sacrifice can't take your pay below the National Minimum Wage, and lowering your salary may slightly reduce statutory maternity pay, mortgage borrowing or life-cover multiples. Many employers pass on their own NI saving to your pot, boosting it further. Compare it with paying from net pay on the salary sacrifice calculator or the pension contribution calculator.
You give up part of your gross salary and your employer pays it into your pension. Because that money never counts as your salary, you avoid both Income Tax and the 8%/2% employee National Insurance on it — so £100 into your pension costs a basic-rate earner about £72 of take-home.
For most employees, yes. A normal net-pay contribution saves Income Tax but not National Insurance, whereas salary sacrifice saves both. Many employers also add their own NI saving to your pension, making it even more efficient.
It can. Because it lowers your gross salary, it may slightly reduce mortgage borrowing, statutory maternity pay or salary-linked benefits like life cover. It also cannot take your pay below the National Minimum Wage.
Yes. Sacrifice reduces your adjusted net income, which can pull you back under £100,000 to restore the tapered Personal Allowance, or under £60,000 to cut the High Income Child Benefit Charge — often saving more than the headline tax and NI.
