Salary Sacrifice Calculator

The short answer

• For pensions and Cycle to Work, you save Income Tax and National Insurance: each £1 costs a basic-rate taxpayer 72p.
• Higher-rate taxpayers pay 58p per £1, and in the £100,000 trap as little as 38p.
• Your employer saves 15% National Insurance too, and may add it to your pension.
• Most other benefits, like tech or gym schemes, save only National Insurance.

How salary sacrifice works

You and your employer agree to change your contract so your salary is lower, and in return your employer provides a benefit worth the same amount. Because your salary is lower, you pay less Income Tax, National Insurance and student loan. Your employer pays less employer National Insurance. The benefit itself is either tax-free or taxed under special rules. It is a contractual change, so it should be agreed in writing, usually for at least a year.

Which benefits save tax

Since April 2017, the optional remuneration rules mean that for most benefits you are taxed on the salary you gave up, or the benefit’s taxable value if higher. Pensions, pension advice, Cycle to Work, childcare and cars with emissions of 75g/km or less are protected.

Worked examples

Pension salary sacrifice

Pension contributions are the most common use. Compared with a net pay or relief at source pension, sacrifice adds a National Insurance saving: 8p in the pound for basic-rate taxpayers and 2p for higher-rate. The money goes into your pension as an employer contribution. On £60,000, sacrificing £5,000 into a pension costs £2,900 of take-home, a saving of £2,100. See the pension tax relief calculator to compare methods.

The employer's NI saving

Employers pay 15% National Insurance on salary above £5,000 a year. When you sacrifice salary for a pension or bike, they save 15% of it. Some employers pass all or part of this into your pension, which can add 15% to your contribution for free. On £2,000 a year, that is an extra £300. Ask your employer whether they do this; the calculator lets you include it.

Using sacrifice around tax thresholds

• £50,270: sacrificing the salary above this keeps you a basic-rate taxpayer and doubles your Personal Savings Allowance. On £55,000, sacrificing £4,730 saves £1,987.
• £60,000: keeps you clear of the High Income Child Benefit Charge.
• £100,000: sacrifice wins back your Personal Allowance and keeps funded childcare. On £105,000, sacrificing £5,000 costs only £1,900 of take-home.
• Student loans: a lower salary also means lower repayments, a further 9% saving above your threshold.

Cycle to Work

Through Cycle to Work your employer hires you a bike and safety equipment, and you repay it from your salary before tax and NI, usually over 12 months. There is no fixed limit, though many schemes cap the value. At the end, you can usually buy the bike for a small fee or keep hiring it. A £1,500 e-bike costs a basic-rate taxpayer about £1,080 after the 28% saving, less the end-of-hire fee.

Electric cars

Electric cars are one of the best-value sacrifices because the taxable benefit is small: 4% of the list price in 2026/27. Your sacrifice also covers insurance and servicing. The calculation is different from this page; use the EV salary sacrifice calculator.

Tech, gym and other schemes

Schemes offering phones, laptops, gym membership or health checks are often called salary sacrifice, but under the optional remuneration rules you pay Income Tax on the salary given up. You still save National Insurance, 8% for most employees, and the cost is spread through payroll. They can be convenient, but the saving is small, and shopping around may cost less.

The minimum wage limit

A salary sacrifice cannot take your cash pay below the National Minimum Wage for the hours you work. In 2026/27 the National Living Wage is £12.71 an hour for people aged 21 and over. On a full-time 37.5-hour week that is about £24,785 a year. Employers check this before agreeing a sacrifice; the calculator warns you if your pay would fall below it.

What a lower salary can affect

• Mortgages: lenders may use your reduced salary, cutting how much you can borrow.
• Statutory pay: maternity, paternity and sick pay are based on actual earnings, so a large sacrifice can reduce them.
• Life cover and pay rises: some are linked to salary; check whether your employer uses the pre-sacrifice figure.
• State benefits: very low earnings could affect your National Insurance record if pay falls below £129 a week.

The 2029 National Insurance cap

From April 2029, National Insurance relief on pension salary sacrifice will be capped: only the first £2,000 a year of sacrificed salary will be free of employee and employer National Insurance. Income Tax relief is not affected. The calculator uses today’s rules, where there is no cap.

Joining, changing and leaving

Sacrifice arrangements are normally agreed for at least a year and can only be changed at set times, such as the start of the scheme year, or after a life event like the birth of a child, marriage or a change of job. Pension sacrifice can often be changed more freely. If you leave your job during a bike or car scheme, you may have to pay off the rest from your final pay.

If you are not an employee

Salary sacrifice is only for employees. Company directors can get a similar result by having their company pay pension contributions directly, which are deductible for Corporation Tax. Self-employed people get tax relief on personal pension contributions through relief at source and Self Assessment, but no National Insurance saving.

A higher-rate example

If the employer adds its £750 saving, £5,750 goes into the pension for a £2,900 fall in take-home: each pound in the pension costs about 50p.

Sacrificing a bonus

Many employers let you sacrifice some or all of a bonus into your pension. This can be especially valuable when the bonus would take you into a higher band or over £100,000 for the year. The sacrifice has to be agreed before the bonus is paid; you cannot redirect it afterwards. See the bonus tax calculator.

How it shows on your payslip

On your payslip, the sacrificed amount appears as a deduction before tax, often labelled with the scheme name, and your taxable pay and NIable pay are both reduced. For a pension, your employer’s contribution increases by the same amount. Check the first payslip after joining to make sure the sacrifice has been taken before tax and National Insurance, not after.

Child Benefit and childcare

Salary sacrifice reduces your adjusted net income, the figure used for the High Income Child Benefit Charge and for the £100,000 limit on funded childcare and Tax-Free Childcare. For parents earning just over £60,000 or £100,000, a pension sacrifice can be worth far more than the tax and NI saving alone, because it can keep thousands of pounds of Child Benefit or childcare support.

Scottish taxpayers

In Scotland the saving depends on your Scottish band: 19% or 20% for starter and basic-rate taxpayers, 21% for intermediate, 42% for higher, 45% for advanced and 48% for top-rate taxpayers, plus the same National Insurance saving as elsewhere. A Scottish taxpayer earning £45,000 saves 42% Income Tax and 8% National Insurance on a pension sacrifice, so each £1 costs only 50p. Choose Scotland under More options to see your figures.

Checking the minimum wage yourself

Divide your salary after the sacrifice by 52 and by your paid hours a week to get your hourly rate. Compare it with the rate for your age: £12.71 at 21 or over, £10.85 at 18 to 20 and £8.00 under 18 or as an apprentice in the first year. If you work variable hours, your employer has to check each pay period, so a sacrifice may be limited in months when you work more hours.

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