See the trade-off from salary sacrifice.

How it works

Compare contractual pay before and after an exchange

A pension salary-sacrifice arrangement is an agreement to reduce future contractual cash pay in return for an employer pension contribution. The calculator compares payroll before and after the proposed exchange using the selected UK tax year, region, salary, bonus, taxable benefits and student-loan plan.

Because the sacrificed amount is removed from cash pay, the model estimates changes in Income Tax, employee National Insurance and student-loan deductions. It also calculates the employer National Insurance saving and adds the percentage you say the employer will share. An employer is not required to offer salary sacrifice or share that saving.

Read the guide to pension salary sacrifice

Understanding your result

Compare take-home cost with new pension funding

The annual take-home reduction is the estimated difference between net pay before and after sacrifice. It will normally be less than the salary exchanged where the arrangement reduces Income Tax or National Insurance. “Total annual pension funding” also includes any existing employee and employer contributions entered, so use the comparison table to isolate the increase.

The employer National Insurance saving is shown separately from the amount shared with the pension. Student-loan deductions may also fall when assessed pay is lower, but that is a reduction in current repayments rather than tax relief and could affect how the loan balance is repaid over time.

Worked example

For the 2025 to 2026 tax year, an employee in England earning £50,000 who exchanges £5,000 of salary would see an estimated £3,600 reduction in annual take-home pay. The model shows £1,000 less Income Tax and £400 less employee National Insurance.

If the employer already contributes £1,500 and shares half of its estimated £750 National Insurance saving, total annual pension funding becomes £6,875: the £5,000 exchange, £1,500 existing employer contribution and £375 shared saving. Actual payroll figures and employer scheme rules may differ.

Assumptions and limitations

This is not an employer offer or payroll instruction

A valid arrangement normally changes employment terms before the sacrificed pay is earned. Lower contractual pay can affect statutory payments, life cover, overtime, pay rises, workplace-pension calculations, borrowing assessments and other salary-linked benefits. Employers may use a notional pre-sacrifice salary for some purposes, but their policies vary.

The calculator warns against a salary floor you enter, but it does not know your hours or test National Minimum Wage compliance. It also does not assess pension tax-relief eligibility, the Annual Allowance, carry forward, the tapered Annual Allowance or the Money Purchase Annual Allowance.

Results use the rules stored for the selected tax year. They do not model the announced change from April 2029, when the National Insurance exemption for employee pension contributions made through salary sacrifice is due to be capped at £2,000 a year. Check the latest rules before changing an arrangement.