Salary Sacrifice Calculator UK 2026/27
Estimate how exchanging salary for an employer pension contribution could change your take-home pay, Income Tax and National Insurance. See the employee cost, pension amount and potential employer NI saving instantly.
Enter your details
Use annual figures before PAYE deductions.
Your contractual cash salary before the proposed sacrifice.
The cash salary exchanged for a pension contribution.
For example rental profit. Exclude dividends and savings interest.
National Minimum Wage screening
Optional check using annualised hours. Employers must still check each pay reference period.
Estimate for a standard PAYE employee using National Insurance category A and a registered pension. It does not include student loans, benefits in kind, tax-code adjustments, bonus timing, pension carry forward or scheme-specific charges.
Your estimated result
Before and after the proposed pension salary sacrifice.
Estimated annual cost to take-home pay
£3,600.00
£5,000.00 goes into the pension, before any employer NI saving is shared.
| Annual estimate | Before | After sacrifice |
|---|---|---|
| Cash salary | £50,000.00 | £45,000.00 |
| Income Tax | £7,486.00 | £6,486.00 |
| Employee National Insurance | £2,994.40 | £2,594.40 |
| Estimated net income in this model | £39,519.60 | £35,919.60 |
| Added employer pension contribution | £0.00 | £5,000.00 |
The employer’s estimated £750.00 NI saving is shown separately. Whether any of it is added to the pension depends on the employer’s scheme rules.
What is pension salary sacrifice?
Pension salary sacrifice is a contractual agreement in which an employee gives up part of their cash salary and the employer pays an equivalent amount into a registered pension. In 2026/27, the lower cash salary can reduce Income Tax and employee National Insurance, while the employer may also pay less employer National Insurance.
How salary sacrifice changes take-home pay
The amount sacrificed is not received as cash. It is paid by the employer into the pension, so take-home pay falls—but normally by less than the amount contributed because PAYE tax and employee National Insurance are calculated on the reduced cash salary.
This calculator compares taking the full salary as cash with exchanging the selected amount for an employer pension contribution. It therefore shows the tax and NI difference against a no-sacrifice cash-pay scenario. If you are comparing salary sacrifice with an existing net-pay or relief-at-source pension contribution, the additional advantage may mainly be National Insurance rather than Income Tax.
What “SMART salary sacrifice” means
Some employers and pension providers use “SMART” or “SMART pensions” for a salary-sacrifice design in which employee contributions are replaced by employer contributions. The employer may keep, share or fully add its NI saving to the pension. The label is not a single statutory calculation method, so check the rules of the actual workplace scheme.
Who this calculator is for
- Employees considering pension salary sacrifice.
- Employers estimating payroll and employer NI effects.
- Company directors paid through PAYE who want an initial comparison.
- London businesses reviewing pension deductions before changing payroll.
Current figures
Salary sacrifice tax and NI rates used for 2026/27
The calculator uses annualised thresholds for a standard PAYE employee. Actual payroll deductions are normally calculated by pay period and can differ slightly because of rounding, tax codes and National Insurance category letters.
| Item | Threshold or band | Rate | Why it matters |
|---|---|---|---|
| Standard Personal Allowance | Up to £12,570; tapers above £100,000 | 0% | Reduces taxable income before Income Tax |
| Basic Income Tax | First £37,700 of taxable income outside Scotland | 20% | A £100 sacrifice may reduce tax by £20 in this band |
| Higher Income Tax | Taxable income from £37,701 to £125,140 outside Scotland | 40% | A £100 sacrifice may reduce tax by £40 in this band |
| Additional Income Tax | Taxable income above £125,140 outside Scotland | 45% | A £100 sacrifice may reduce tax by £45 in this band |
| Employee Class 1 NI | £12,570 to £50,270, then above £50,270 | 8%, then 2% | Current employee NI saving varies by earnings band |
| Employer Class 1 NI | Above the £5,000 secondary threshold | 15% | Employer may keep or share this saving |
| National Living Wage | Age 21 and over from 1 April 2026 | £12.71/hour | Cash earnings cannot be reduced below the applicable minimum |
| Standard pension annual allowance | Total pension input, subject to individual limits | £60,000 | Employer and employee pension input can use the allowance |
Worked example: £50,000 salary and £5,000 sacrifice
For an employee in England, Wales or Northern Ireland with no other taxable income, the calculator estimates the following. It assumes the employer keeps its NI saving.
Known change from 6 April 2029
Under the announced reform, only the first £2,000 a year of employee pension contributions made through salary sacrifice will remain exempt from employee and employer National Insurance. Contributions above that amount will still receive Income Tax treatment under the usual pension rules, but NI will apply. This calculator models the current 2026/27 rules, not the 2029 reform.
Before you agree
Salary sacrifice advantages, limits and checks
The calculation is useful for an initial decision, but payroll implementation requires more than choosing a percentage.
Potential advantages
- Lower employee National Insurance under the current 2026/27 rules.
- Potential employer NI saving, some or all of which may be added to the pension.
- A lower adjusted net income may help some people around the Personal Allowance taper or income-based benefit thresholds.
- Contributions are made through payroll without the employee claiming basic pension tax relief separately.
Important limits
- Cash earnings must not fall below the applicable National Minimum Wage.
- The employment contract must be changed prospectively and the employee must agree.
- Reduced cash pay can affect statutory pay, contribution-based benefits and some borrowing assessments.
- The standard pension annual allowance is £60,000, but tapering, the £10,000 Money Purchase Annual Allowance and carry-forward rules can change an individual’s position.
- Auto-enrolment definitions and employer contribution calculations depend on the pension scheme’s rules.
Next step
Use the result for the right payroll decision
Move from an estimate to the guide, calculator or service that matches your situation.
Common questions
Salary sacrifice calculator FAQs
How do I calculate salary sacrifice?
Subtract the agreed sacrifice from contractual cash salary, then recalculate Income Tax and employee National Insurance on the lower cash pay. Compare take-home pay before and after. The amount sacrificed is paid by the employer into the pension, and any employer NI saving is calculated separately.
How much National Insurance can salary sacrifice save in 2026/27?
For a standard category A employee, the current annualised Class 1 rates are 8% between £12,570 and £50,270 and 2% above £50,270. The exact saving depends on which earnings band the sacrificed amount would otherwise occupy. Employers generally pay 15% above the £5,000 secondary threshold.
Does salary sacrifice save Income Tax as well as National Insurance?
Compared with taking the same amount as cash, a registered pension salary sacrifice normally reduces taxable cash pay and employee NI. However, ordinary pension contributions can already receive Income Tax relief through net pay or relief at source, so the extra advantage of switching method may mainly be National Insurance.
What is a SMART salary sacrifice calculator?
“SMART” is a name used by some employers and providers for pension salary sacrifice. The employee’s cash salary is reduced and the employer pays into the pension. Some schemes add part or all of the employer NI saving. The exact design varies, so a calculator must state the assumed sharing percentage.
Can salary sacrifice reduce pay below minimum wage?
No. HMRC guidance says a salary sacrifice arrangement must not reduce cash earnings below the applicable National Minimum Wage. Employers need controls for each pay reference period. The screening in this calculator uses annualised hours only and does not replace a formal payroll check.
Can salary sacrifice affect maternity pay, mortgages or other benefits?
It can. Lower contractual cash earnings may affect statutory payments, some contribution-based benefits and how a lender assesses income. Some employers use a notional pre-sacrifice salary for occupational benefits, but this must be stated clearly. Review the scheme documents and your circumstances before agreeing.
How much can I salary sacrifice into a pension?
The arrangement cannot take cash pay below minimum wage. Pension tax limits also matter: the standard annual allowance is £60,000 for 2026/27, but it can be tapered and the Money Purchase Annual Allowance may be £10,000. Employer contributions and other pension input must be considered together.
Is pension salary sacrifice changing in 2029?
Yes. The government has announced that from 6 April 2029 only the first £2,000 of employee pension contributions through salary sacrifice will be exempt from National Insurance. Amounts above the cap will still be exempt from Income Tax under the usual pension rules, but employee and employer NI will apply.
Need to set up salary sacrifice through payroll?
Path Accountants supports employers from our Wembley office and works with businesses across London. We can review the payroll effect, pension setup and implementation steps before the first sacrificed payment is processed.