Work out what a pension sacrifice really costs you in take-home pay. Most calculators show the tax saving and miss the National Insurance — which is the entire point of doing it this way.
Open the calculator →With an ordinary pension contribution you pay in from taxed income and reclaim the income tax. With salary sacrifice you formally give up salary and your employer pays it into the pension instead. Your contractual pay is lower, so the sacrificed amount never gets touched by income tax or employee National Insurance.
That NI saving — 8% below £50,270, 2% above — is what an ordinary relief-at-source contribution cannot give you. It is the whole reason the arrangement exists.
| Your income | Tax saved | NI saved | Take-home cost of £100 |
|---|---|---|---|
| Basic rate (£12,571–£50,270) | 20% | 8% | £72 |
| Higher rate (£50,271–£100,000) | 40% | 2% | £58 |
| Taper band (£100,001–£125,140) | 60% effective | 2% | £38 |
| Additional rate (£125,141+) | 45% | 2% | £53 |
The taper band is the standout: because the personal allowance is withdrawn at £1 per £2 between £100,000 and £125,140, the effective income tax rate there is 60% — explained in full on the take-home pay page. Add the 2% NI and each £100 sacrificed in that band costs just £38 of take-home pay. A sacrifice that brings adjusted income back under £100,000 is one of the most tax-efficient moves available in the UK system.
| Item | Before | After sacrifice |
|---|---|---|
| Contractual salary | £45,000.00 | £42,000.00 |
| Income tax | £6,486.00 | £5,886.00 |
| National Insurance | £2,594.40 | £2,354.40 |
| Take-home | £35,919.60 | £33,759.60 |
| Into your pension | £0 | £3,000.00 |
£3,000 lands in the pension; take-home falls by only £2,160. The £840 difference is the £600 of income tax and £240 of NI that were never charged — a guaranteed 28% uplift before any investment growth, and before any employer NI share (below).
Your employer saves employer's National Insurance at 15% on every pound you sacrifice — on the £3,000 above, that is £450 they no longer pay. Some employers add part or all of that saving to your pension; many keep it. It costs nothing to ask, and a "we pass on 50% of the employer NI saving" policy meaningfully changes the arithmetic in your favour.
Your contractual salary is genuinely lower. That is not a technicality — several things key off it.
Your salary and pension figures stay in your browser — no account, no server, nothing stored anywhere but your own device.
A relief-at-source contribution reclaims income tax but not employee NI. Sacrifice avoids both, because the salary is never paid to you in the first place.
Some employers offer cycle-to-work, ultra-low-emission car schemes and similar. Since 2017 most other benefits no longer carry the tax advantage — pensions remain the main case.
No. It shows the arithmetic. Whether sacrifice suits you depends on your mortgage plans, benefits and cash-flow needs — free impartial guidance is available from MoneyHelper, and this page is not a substitute for it.
Take-home pay calculator · Pension calculator · ISA allowance · Scottish income tax · Compound interest
Palarid is free and private. Open Palarid → · All free calculators · Trust Centre · About