Salary Sacrifice Pension Calculator UK 2025/26

Salary sacrifice (also called salary exchange) is an arrangement where you give up part of your gross salary in exchange for employer pension contributions of the same value. Because the sacrifice happens before tax, you save income tax and National Insurance on the amount — and your employer saves employer NI (13.8%) on it too.

A basic-rate taxpayer sacrificing £100/month saves £32 in income tax (20%) and employee NI (12%), so the real cost is only £68. A higher-rate taxpayer (40%) saves £42, costing just £58. Above £50,270 the NI rate drops to 2%, so savings narrow slightly.

Many employers do — this is one of the best parts of salary sacrifice. If your employer adds their 13.8% NI saving to your pension contribution you get an automatic 13.8% bonus on top of the normal tax relief. Ask your HR or payroll team whether this applies to you.

Yes. Your total pension contributions (personal + employer) cannot exceed the Annual Allowance (£60,000 for 2025/26, or 100% of your relevant UK earnings if lower). Additionally, salary sacrifice cannot reduce your cash salary below the National Living Wage.

Salary sacrifice reduces your contractual salary on paper, which can affect mortgage applications, life assurance multiples, and some benefits linked to "pensionable pay". It has no effect on your state pension entitlement if your remaining salary stays above the Lower Earnings Limit (£6,396 for 2025/26).