Salary Sacrifice Calculator · Methodology

How the calculation works

Compare a normal tax-relieved employee pension contribution with pension salary sacrifice under UK 2026/27 rules, including the take-home cost and employer National Insurance saving.

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Included

England, Wales and Northern Ireland Income Tax bands
Scottish non-savings, non-dividend Income Tax bands
Personal Allowance tapering above £100,000
Employee and employer Class 1 National Insurance
Net pay and relief-at-source comparison methods
Salary sacrifice
Student Loan Plans 1, 2, 4 and 5
Postgraduate Loan deductions
Optional employer NI saving shared into the pension
Effective take-home cost per £1 entering the pension

Outside this method

Bonus sacrifice
Ordinary employer pension contributions
Benefits in kind and tax-code adjustments
Pension annual-allowance and tapered-allowance charges
Child Benefit and childcare entitlement calculations
National Minimum Wage compliance testing
Statutory pay and employment-benefit effects
Future tax on pension withdrawals
The April 2029 salary-sacrifice NI restriction

Calculation

Core formulas

Gross contribution

Contribution = annual salary × contribution rate

The same gross amount is compared under the selected normal contribution method and salary sacrifice.

Salary after sacrifice

Cash salary = annual salary − sacrificed contribution

Income Tax, employee NI, employer NI and selected student-loan earnings use this reduced cash salary in the salary-sacrifice scenario.

Normal net pay

Take-home = salary − Income Tax after contribution − employee NI on full salary − contribution − student loans

A net pay contribution reduces taxable pay but not National Insurance earnings.

Employer NI saving

Saving = employer NI on normal salary − employer NI on reduced salary

The 2026/27 main employer rate is 15% above the £5,000 annual secondary threshold.

Pension after employer sharing

Pension = sacrificed contribution + employer NI saving × sharing percentage

The employer may share none, some or all of its saving.

Effective cost per £1

Cost = reduction in take-home versus no contribution ÷ amount entering pension

The result measures current cash cost and does not deduct future pension withdrawal tax.

Timing convention

When cash flows occur

Salary and pension contributions are annualised across one complete 2026/27 tax year. The displayed monthly figures divide annual results by 12; real payroll uses pay-period thresholds, dates and rounding. Relief-at-source results assume additional relief is ultimately claimed even when it is not visible on the same payslip.

Limitations

What the result cannot establish

A salary sacrifice agreement changes contractual remuneration and depends on employer scheme rules.
Pension contributions cannot reduce cash earnings below National Minimum Wage.
The calculation assumes National Insurance category A and one employment.
Student-loan deductions use annualised earnings; payroll applies pay-period thresholds.
Relief at source can require a separate claim for relief above the basic rate.
The £100,000 childcare and £60,000–£80,000 Child Benefit signals are prompts only, not entitlement calculations.
From April 2029, planned rules cap salary-sacrificed employee pension contributions exempt from employee and employer NI at £2,000 a year; this methodology deliberately applies current 2026/27 rules.

Reference tests

Numerical checks

Case	Inputs	Expected result
Higher-rate employee	£60,000 salary; 10% contribution; England; net pay; no student loan; no employer sharing	Salary sacrifice saves £120 employee NI and raises annual take-home by £120 versus net pay
Full employer sharing	Same case; employer shares 100% of NI saving	£900 employer NI saving is added, so £6,900 enters the pension
Plan 2 borrower	Same £60,000 case; Plan 2 loan	Salary sacrifice reduces modelled annual Plan 2 deductions by £540 in addition to £120 employee NI
Personal Allowance taper	£110,000 salary; 10% contribution; England; net pay	The contribution reduces modelled taxable salary to £99,000 and restores the full standard Personal Allowance

Evidence

Sources

HMRC — Salary sacrifice and the effects on PAYE HMRC — Rates and thresholds for employers 2026 to 2027 HMRC — Employer further guide to PAYE and National Insurance 2026 to 2027 GOV.UK — Pension tax relief GOV.UK — Student-loan repayment amounts GOV.UK — Salary sacrifice pension changes from April 2029