Salary Sacrifice Calculator
Calculate your tax and NI savings from salary sacrifice — pension contributions, electric vehicle leasing, and cycle-to-work schemes. See the real cost of your benefits and how much you save compared to paying from net income.
Annual Tax + NI Saved
£560Cost Per £1 Sacrificed
72pTotal Pension / Year
£2,000Net Cost of Benefits
£1,440| Without | With Sacrifice | You Save | |
|---|---|---|---|
| Gross Salary | £40,000 | £38,000 | — |
| Income Tax | £5,486 | £5,086 | £400 |
| Employee NI | £2,194 | £2,034 | £160 |
| Take-Home Pay | £32,320 | £30,880 | — |
| Gross Salary Sacrificed | £2,000 | ||
| Less: Tax + NI Savings | £560 | ||
| Net Cost of Benefits (fall in take-home pay) | £1,440 | ||
Pricing a specific employer EV quote? Use the dedicated Electric Car Salary Sacrifice Calculator for a personal-lease comparison, student loans and the £100k threshold.
How Salary Sacrifice Works
Salary sacrifice (also called salary exchange) is an agreement between you and your employer to reduce your gross salary in exchange for a non-cash benefit. Because your contractual pay is lower, you pay less income tax and National Insurance on the sacrificed amount — making the benefit significantly cheaper than buying it with net income.
Pension
Pension salary sacrifice is the most common type. Instead of contributing to your pension from net pay (with tax relief claimed back), your employer redirects the amount before tax. You save both income tax and employee NI. Your employer also saves employer NI (15%) on the sacrificed amount — many employers pass some or all of this saving back to you as additional pension contributions.
Electric Vehicle
Your employer leases an electric vehicle and you sacrifice salary to cover the lease cost. Because pure EVs have a Benefit-in-Kind rate of just 4% (2026-27), the tax on the benefit is far less than the salary you sacrifice — creating a large net saving. This makes EV salary sacrifice one of the cheapest ways to drive a new electric car.
Cycle to Work
Your employer provides a bicycle and safety equipment through salary sacrifice. Cycles are exempt from the Optional Remuneration Arrangements (OpRA) rules, so you save the full income tax and NI on the sacrifice amount. There is no government-imposed value limit, though individual employers may set their own caps.
Key Rules
National Minimum Wage floor: Your sacrifice cannot reduce your hourly pay below the NMW (£12.71/hour from April 2026 for age 21+). This is a legal requirement your employer must check.
OpRA exemptions: Only certain benefits keep the full salary sacrifice tax advantage: employer pension contributions, cycles, and cars with CO₂ emissions of 75g/km or less. Other benefits (e.g., private medical insurance) are taxed under the Optional Remuneration Arrangements rules.
April 2029 reform: From 6 April 2029, pension salary sacrifice above £2,000/year will become subject to employee and employer NI. Until then, no NI cap applies to pension sacrifice.
What you save per £1,000 sacrificed (2026/27)
Pension salary sacrifice saves both income tax and employee National Insurance (8% in the basic band, 2% above the Upper Earnings Limit). Your employer also saves 15% employer NI (£150 per £1,000), which many schemes add back to your pension.
| Earnings band | Income tax | Employee NI | You save per £1,000 |
|---|---|---|---|
| Basic rate (£12,571–£50,270) | 20% | 8% | £280 |
| Higher rate (£50,271–£100,000) | 40% | 2% | £420 |
| £100k–£125,140 PA-taper trap | 60% | 2% | £620 |
| Additional rate (£125,140+) | 45% | 2% | £470 |
Scotland's income-tax bands differ, so the income-tax portion varies; employee NI is UK-wide. Excludes any employer NI shared back.
Worked examples (2026/27)
Basic-rate, £5,000 into pension
Saves 28% = £1,400 in tax + NI, so £5,000 in your pension costs about £3,600 of take-home.
Higher-rate, £10,000 into pension
Saves 42% = £4,200; net cost about £5,800 — plus any employer NI added back.
£110,000 earner — the 60% trap
Sacrificing £10,000 restores Personal Allowance: effective relief 62% = £6,200, so the pension costs about £3,800.
EV lease vs net pay
A pure EV is taxed at just 4% Benefit-in-Kind (2026/27), so sacrificing salary for the lease beats paying from net income — the BiK is far smaller than the tax + NI saved on the sacrifice.
Frequently asked questions
What is salary sacrifice?
Does salary sacrifice affect my mortgage application?
Does salary sacrifice reduce my State Pension?
Can I sacrifice below minimum wage?
What happens if I leave my employer during an EV lease?
Is cycle-to-work still tax-free?
How does salary sacrifice interact with the £100K tax trap?
What changes to salary sacrifice in April 2029?
Does salary sacrifice reduce student loan repayments?
Can I combine multiple salary sacrifice schemes?
Sources
See the NI thresholds behind these savings
Full 2026-27 & 2025-26 NI rates, Lower Earnings Limit, and category letters
Related Calculators
Learn More
Salary Sacrifice Pension: Save £1,000s on Tax and NI
Salary sacrifice can save you thousands in tax and National Insurance. See how it works, the real savings at each income level, and the trade-offs to watch for.
Pension Tax Relief: How It Works for Basic, Higher, and Additional Rate Taxpayers
Pension contributions benefit from income tax relief — making pensions one of the most tax-efficient ways to save. Here's how basic, higher, and additional rate relief works in practice.
UK NI Classes 1, 2 & 4 — 2025-26 & 2026-27 (HMRC)
HMRC NI classes for 2025-26 and 2026-27: Class 1 (employed 8%/2%), Class 2 voluntary (£3.50/wk 2025-26, £3.65 2026-27), Class 4 (self-employed 6%/2%). Who pays and impact.