Pension Salary Sacrifice Calculator

With pension salary sacrifice, you give up part of your salary and your employer pays the same amount into your pension. Tax and National Insurance are no longer taken from that pay, so on a £45,000 salary, sacrificing 5% puts £188 a month into your pension and lowers take-home pay by only £135 a month.

It is also called salary exchange, or a SMART pension, by some providers. The calculator above works it out for your own pay.

Your employer changes your contract so your cash salary is lower, and pays the difference into your workplace pension as an employer contribution. Because the money never reaches your payslip as pay:

• no income tax is taken from it, the same as other workplace pension contributions;
• no National Insurance is taken from it either (8% for most earners, 2% above £50,270), which the normal ways of paying in do not avoid;
• student loan repayments and the income used for the Child Benefit charge and the £100,000 limits are worked out on the lower pay;
• your employer saves its own 15% National Insurance, and some employers pay part or all of that into your pension too.

Your employer has to offer it and agree to it. HMRC's guidance says the arrangement cannot take your pay below the minimum wage.

Each £1 that goes into your pension costs you less than £1 of take-home pay. How much less depends on your tax band. Figures a month, England, Wales and Northern Ireland, 2026/27, no student loan:

Workplace pensions take your own contribution in one of three ways. For the same amount going in, income tax relief is the same in all three; the differences are National Insurance and how low earners are treated.

• Salary sacrifice: no income tax, NI or student loan on the amount.
• Net pay: taken before income tax, but NI and student loan are still charged on it.
• Relief at source: paid from take-home pay; the scheme adds 20%, and higher-rate taxpayers claim the rest from HMRC. NI and student loan are still charged.

Below the tax and NI thresholds the order changes. On £12,000 a year, 5% by relief at source costs £480 of take-home pay against £600 by salary sacrifice, because the 20% top-up is paid even when no tax is due. Net pay schemes now get a similar top-up from HMRC after the tax year (£120 here).

From 6 April 2029, only the first £2,000 a year of pension salary sacrifice stays free of National Insurance. Above it, both your NI and your employer's NI are charged, as on ordinary pay. Income tax relief does not change, and a sacrificed bonus counts towards the same £2,000.

Example: on £55,000, sacrificing £5,000 a year saves £116 of NI today. From April 2029 you would pay £76 a year more NI, and your employer's NI saving falls from £750 to £300. The calculator's "From April 2029" tab shows this for your figures.

Source: HM Treasury and HMRC, Changes to salary sacrifice for pensions from April 2029, 26 November 2025.

Between £100,000 and £125,140 your personal allowance shrinks by £1 for every £2 of income, so each extra £1 is taxed at an effective 60%. Salary sacrifice lowers the income this is measured on.

Example: on £110,000, sacrificing £10,000 gives back £5,000 of allowance and saves £6,000 of income tax, so each £1 in the pension costs 38p.

The same £100,000 is the limit for Tax-Free Childcare (up to £2,000 a year for each child) and, in England, the funded childcare hours for working parents. Add your children in paid childcare in "Make it exact" to see where you land.

Over £60,000 of adjusted net income, the High Income Child Benefit Charge takes back 1% of your Child Benefit for every £200, and all of it at £80,000. Pension contributions lower adjusted net income.

Example: on £70,000 with two children, sacrificing £10,000 removes a charge of £1,168 a year, on top of £4,000 of income tax. The charge falls on the partner with the higher income.

Student loan repayments are worked out on your pay after sacrifice, so they fall too. On £45,000 with a Plan 2 loan, sacrificing £3,000 lowers repayments by £276 a year. 9% of £3,000 is £270; the figure here is £276 because payroll rounds each month's deduction down to the pound, before and after. Whether paying less off the loan helps depends on whether you expect to clear it before it is written off.

Scottish taxpayers pay income tax on Scotland's bands (19% to 48%), so the income tax saving follows those rates. National Insurance is the same across the UK. Choose "Scotland" in step 3.

Salary sacrifice lowers your contractual pay, which some other things are based on. The calculator flags the ones your figures touch.

• Maternity, paternity and sick pay: statutory pay uses average earnings, and pay under the lower earnings limit can lose it.
• Mortgage applications: many lenders use your pre-sacrifice salary; it is worth asking yours.
• Life cover and death in service: often a multiple of salary; check which salary your scheme uses.
• Redundancy pay can be based on the lower pay.
• State Pension: only affected if pay falls below the lower earnings limit.

For free, impartial guidance on pensions, MoneyHelper is backed by the government.