Pension Salary Sacrifice Calculator 2026/27
Paying 5% of a £40,000 salary into a pension by salary sacrifice costs you about £1,440.00 a year of take-home for £2,000 in the pension, against £1,600.00 through a net pay scheme: the difference is the 8% National Insurance you no longer pay on the sacrificed amount.
- Every rate links to its official source
- Checked against official examples on every build
- Rates reviewed 25 October 2026
The three ways a pension contribution can be taken
Salary sacrifice. You agree to a lower salary and your employer pays the difference into your pension. Because your salary is lower, you pay less income tax and less National Insurance, and your employer pays less NI too (15%), which some employers share with you. It also reduces student loan repayments. The catch: it lowers the salary used for mortgage applications, statutory pay and some benefits, and it cannot take you below the minimum wage.
Net pay. The contribution is taken from your pay before tax is worked out, so you get full tax relief at your highest rate automatically, but you still pay NI on it. Most occupational schemes work this way. Low earners under the personal allowance get no relief this way (the government tops them up from 2024/25).
Relief at source. The contribution is taken from your pay after tax. You pay 80% and the scheme claims the 20% basic rate relief from HMRC. NEST and most personal pensions work this way. Higher-rate taxpayers must claim the extra 20% or 25% through Self Assessment or a tax code change, or they lose it.
Auto enrolment minimums
An employer must pay at least 3% of qualifying earnings and the total must be at least 8%, so the employee's share is usually 5% (4% plus 1% tax relief in a relief at source scheme). Qualifying earnings are the band between the lower and upper thresholds set each year, not the whole salary, unless the scheme says otherwise. This calculator applies the percentage to the whole salary, which is what most schemes now do.
The £100,000 trap and higher earners
Between £100,000 and £125,140 every £2 of income removes £1 of personal allowance, an effective 60% tax rate. A pension contribution that brings adjusted income back under £100,000 gets relief at that 60% rate, so a £10,000 contribution can cost only £4,000 of take-home. The same applies at £60,000 to £80,000 for parents receiving child benefit, where the High Income Child Benefit Charge is tapered.
The words on this page, in plain English
- Take-home pay
- The money that reaches your bank account after tax, National Insurance and other deductions. Also called net pay.
- Gross pay
- Your pay before anything is taken off. The salary in a job advert is gross pay.
- Personal allowance
- The first £12,570 you earn each year is not taxed. Earn over £100,000 and this allowance shrinks.
- Tax code
- A short code on your payslip, such as 1257L, that tells your employer how much untaxed pay you get. The numbers times 10 is your allowance.
- PAYE
- "Pay As You Earn": your employer takes tax and National Insurance out of each payslip and sends it to HMRC for you.
- National Insurance (NI)
- A second tax on earnings that pays for the State Pension and some benefits. Most employees pay 8% on earnings between £12,570 and £50,270, then 2%.
- Student loan plan
- Which repayment rules apply to your loan. It depends on when and where you studied. Plan 2 covers most English students who started after 2012. Plan 5 those who started after 2023.
- Salary sacrifice
- You give up part of your salary and your employer pays it into your pension instead. You pay less tax and less National Insurance on it.
- Scottish rates
- If you live in Scotland you pay income tax in six bands set by the Scottish Parliament instead of the three bands used in the rest of the UK.
Questions people ask
Is salary sacrifice always better?
For tax and NI, yes: you save 8% NI (2% above £50,270) on top of the income tax relief every method gives. It can be worse if you need the higher headline salary for a mortgage, if it would take you below the minimum wage, or if your employer does not pass on any of its NI saving and you value cash now.
How much does 5% into a pension really cost me?
On £40,000, £2,000 goes into the pension. Through salary sacrifice your take-home falls by about £1,440. Through net pay by £1,600. Through relief at source you pay £1,600 and the scheme adds £400.
Do higher rate taxpayers get 40% relief automatically?
Through salary sacrifice and net pay, yes. Through relief at source you must claim the extra from HMRC.
What is the annual allowance?
£60,000 of total pension contributions a year (yours and your employer's) with full tax relief, tapered for incomes over £260,000. Unused allowance can be carried forward three years.
Sources
The calculator on this page reads its rates from the same file these links are listed in. If a rate changes, the source list changes with it.
- GOV.UK: Rates and thresholds for employers 2026 to 2027 (checked 25 October 2026)
- GOV.UK: Workplace pensions: what you, your employer and the government pay (checked 25 October 2026)
- GOV.UK: Tax on your private pension contributions (checked 25 October 2026)
These figures are estimates to help you plan. Your payslip is the final word: PAYE works month by month, so a single payslip can differ a little, but the yearly totals match. See how we calculate and the accuracy tests.
More UK calculators
Take-home pay, Hourly Wage Calculator, Pro Rata Salary Calculator, Bonus Tax Calculator, National Insurance Calculator, Student Loan Repayment Calculator, Scottish Income Tax Calculator, VAT