UK Tax Guide
How much does salary sacrifice save? UK 2026/27
Salary sacrifice into a workplace pension reduces your gross pay before income tax and National Insurance are calculated. Unlike relief-at-source pensions, you save NI as well as tax. Here is exactly how much at every salary level, using the verified 2026/27 HMRC rates built into the Wealthy Employee calculator.
How salary sacrifice works
Your employer reduces your contractual gross pay by the sacrifice amount. That lower figure is what appears on your P60. Because income tax and Class 1 NI are both assessed on the reduced gross, you save on both. A relief-at-source pension only saves you income tax; salary sacrifice saves you NI too.
Your employer also saves their 15% employer NI on the sacrifice amount. Some employers pass part or all of that saving into your pension pot, making the effective contribution even higher.
Savings by salary (2026/27, employee only)
Assumes a 5% sacrifice rate with no existing pension contributions. Figures from the calculator.
| Gross salary | Sacrifice (5%) | IT saved | NI saved | Total saved | Effective rate |
|---|---|---|---|---|---|
| £30,000 | £1,500 | £300 | £120 | £420 | 28% |
| £50,000 | £2,500 | £500 | £200 | £700 | 28% |
| £80,000 | £4,000 | £1,600 | £80 | £1,680 | 42% |
| £100,000 | £5,000 | £2,000 | £100 | £2,100 | 42% |
At £80K+, the effective saving rate jumps to 42% because you enter the higher-rate band (40% IT + 2% NI). At £100K+, there is an additional benefit: salary sacrifice can pull your adjusted net income below £100,000 and restore the personal allowance taper, worth up to 60% effective relief on the tapered portion.
What about the employer NI saving?
From April 2025, employer NI rose to 15%. On a £5,000 sacrifice, the employer saves £750. If they pass this into your pension, your total contribution is £5,750 for a take-home cost of only £2,900 (at 42% marginal). That is almost a 2:1 ratio of pension contribution to take-home cost. Ask HR whether your scheme passes back the employer NI saving.
Constraints
- You cannot sacrifice below the National Minimum Wage (£12.21/hour in 2026/27 for age 21+).
- Salary sacrifice reduces your pensionable earnings, which can affect mortgage applications and life insurance based on salary multiples.
- Student loan repayments and Child Benefit HICBC are based on the reduced salary, which can be an additional benefit above £50,270.
Calculate your exact saving
Enter your salary in the free tax calculator to see your exact take-home pay, NI, income tax, and the effect of salary sacrifice. The full salary sacrifice guide covers the mechanics in depth, including the impact on student loans and Child Benefit.
For a broader view of all UK tax-advantaged vehicles (ISA, LISA, EV scheme, Cycle to Work, Tax-Free Childcare), see the tax-sheltered vehicles guide.
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