Salary Sacrifice Calculator 2026/27
If you earn £40,000 and sacrifice £200 per month into your pension, you save about £480 in income tax and £192 in National Insurance each year. Take-home drops by £1,728 but £2,400 goes into your pension, plus a 3% employer match (£1,200). Enter your figures below.
Source: HMRC salary sacrifice and PAYE. Supports how the sacrificed amount reduces the gross pay used for tax and NI.
Calculator
The benefit you are exchanging salary for.
Scotland has different income tax rates which affects the income tax saving.
Results
Annual saving by sacrificing for pension
Income tax saving: £480.00 · NI saving: £192.00
- Annual sacrifice£2,400
- Take-home pay drop− £1,728
- Net cost of benefit£1,728
- Effective saving rateIncrease: 28.0%
You sacrifice £2,400/year but your take-home only drops by £1,728/year, saving you £672/year in tax and NI.
Pension Contribution Breakdown
Your pension is boosted by employer contributions AND tax relief - the government effectively tops up your contributions. Your sacrifice of £2,400/year only costs £1,728 in lost take-home pay.
Before vs After Salary Sacrifice
| Before Sacrifice | After Sacrifice | Saving | |
|---|---|---|---|
| Gross Salary | £40,000 | £37,600 | |
| Income Tax | £5,486.00 | £5,006.00 | + £480.00 |
| National Insurance | £2,194.40 | £2,002.40 | + £192.00 |
| Take-Home Pay | £32,320 | £30,592 | − £1,728 |
What this calculation assumes
Calculators model a full tax or contract year in one step. Money is carried at full precision through the calculation and rounded once for display, to the penny for exact amounts and to the nearest pound where a figure is labelled an estimate.
- Pay-period rounding in real payroll can make the yearly total differ by a small amount
- Monthly figures are an annual result divided by twelve, not a payroll month
- A part-year start or leaver date is not modelled unless the page offers it
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How Salary Sacrifice Calculator 2026/27 Works
How the Salary Sacrifice Calculator Works
Enter your current salary, choose your sacrifice type, and set the monthly sacrifice amount. The calculator computes your tax and NI both before and after the sacrifice, showing the exact income tax and NI savings and the real net cost of your benefit.
The Tax and NI Saving Mechanism
When you sacrifice salary, your taxable income falls. Income tax is charged on the lower figure, and so is National Insurance. The combined tax and NI saving is often 28 to 42% of the sacrificed amount, meaning the benefit costs significantly less than its face value.
Pension Sacrifice vs Personal Contributions
With a personal contribution, you pay pension from your net pay and claim tax relief from HMRC. With salary sacrifice, you never pay NI on the amount, saving an additional 8% (or 2% above £50,270). This makes salary sacrifice pension contributions more efficient than personal contributions for most employees.
Electric car salary sacrifice
Electric vehicles through a salary sacrifice scheme avoid income tax and National Insurance on the sacrificed amount, and the company car benefit is rated at just 4 percent for 2026/27. Use our company car tax calculator to see the benefit in kind and annual tax on a specific P11D value and CO2 figure before you sign up.
Scottish Income Tax
Scottish taxpayers pay different income tax rates (19 to 48% across six bands), which changes the income tax saving element of salary sacrifice. Select Scotland in the region selector to see the correct calculation for Scottish taxpayers.
2026/27 Note: Future Salary Sacrifice Cap
Note: From 2029, a new £2,000 annual cap will apply to salary sacrifice pension contributions that qualify for NIC relief. For 2026/27, salary sacrifice remains fully available without this cap.
Frequently Asked Questions
In a salary sacrifice arrangement, you agree to reduce your gross salary in exchange for a non-cash benefit of equal value - such as a pension contribution, Cycle to Work bike, electric car, or childcare vouchers. Because your taxable salary is lower, you pay less income tax and National Insurance. Your employer also pays less employer NI, and many pass some of this saving back as an enhanced benefit.
The saving depends on your tax rate. A basic rate (20%) taxpayer saves 20% income tax plus 8% NI = 28% of the amount sacrificed. A higher rate (40%) taxpayer saves 40% + 2% = 42%. So sacrificing £200/month into your pension costs a basic rate taxpayer only £144/month in lost take-home pay, while £200 goes into the pension - plus any employer contribution on top.
The Cycle to Work scheme allows employees to obtain a bicycle and safety equipment through salary sacrifice, typically saving 25-40% on the cost. The employer purchases the bike and hires it to you in exchange for a salary reduction over 12 months. At the end, you can buy the bike at a nominal 'fair market value'. There is no upper limit on spending since 2019, though schemes typically cap at £1,000-£2,000.
EV salary sacrifice lets you lease a fully electric vehicle through your employer in exchange for a salary reduction. The Benefit in Kind (BiK) rate for fully electric cars is just 2% in 2026/27, making this extremely tax-efficient compared to taking the same pay as salary. You pay income tax and NI on just 2% of the car's P11D value. For a higher-rate taxpayer with a £35,000 EV, the monthly BiK tax is typically under £25.
Yes - salary sacrifice reduces your declared gross salary, which can affect mortgage affordability assessments (lenders look at gross income), pension-linked benefits, life insurance multiples, and income-related benefits. It can also affect statutory payments based on 'normal pay' (such as statutory maternity/paternity pay). Always consider these implications before agreeing to a sacrifice arrangement.
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Salary Sacrifice Savings Guide
Complete guide to salary sacrifice for pension, Cycle to Work, EVs, and childcare. Includes comparison spreadsheet, tax saving tables by salary band, and employer setup checklist.
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Sources and method
- HMRC salary sacrifice and PAYE (HM Revenue & Customs). Supports: How the sacrificed amount reduces the gross pay used for tax and NI. United Kingdom, Current guidance.
- HMRC Income Tax rates and allowances (HM Revenue & Customs). Supports: Income tax on the reduced gross pay. England and Wales, 2026/27 tax year. Source checked on .
- HMRC National Insurance rates and categories (HM Revenue & Customs). Supports: National Insurance on the reduced gross pay. United Kingdom, 2026/27 tax year. Source checked on .
Method: Annual estimates and rounding.
Spotted a figure that looks wrong? Report a correction and we will check it against the source above.
Further reading
Background references used while writing this page. The sources behind the calculated figures are listed above.
Disclaimer: This calculator provides estimates based on standard HMRC rates for 2026/27. Results may vary based on individual circumstances. This is not financial advice. Always consult a qualified accountant or CIMA-qualified financial adviser for personal tax matters.