Salary Sacrifice and Pension Tax Relief Calculator 2026/27

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Gross annual salary (£)

Pension contribution (% of salary)

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The calculator uses rates for England, Wales and Northern Ireland. If you live in Scotland, the Income Tax figures will be different.

How this calculator works

When you pay into a workplace or personal pension, you normally get tax relief at your highest rate of Income Tax. How the relief reaches you depends on how your scheme is set up. There are three common methods, and this calculator applies the same total pension contribution to each so you can compare them side by side:

Net pay arrangement: your employer takes the contribution from your salary before working out Income Tax. You get full relief straight away through payroll, but you still pay National Insurance on your full salary.
Relief at source: your contribution is taken from your pay after tax. You pay 80% of the amount and the pension provider claims the other 20% from HMRC. If you pay tax at 40% or 45%, you can claim the extra relief yourself, for example through Self Assessment. The calculator shows that extra amount separately.
Salary sacrifice: you agree to a lower salary and your employer pays the difference into your pension. Because your salary is lower, you pay less Income Tax and less National Insurance. Your employer also pays less employer National Insurance.

For each method the calculator works out Income Tax using the 2026/27 rates for England, Wales and Northern Ireland, the Personal Allowance taper above £100,000, and employee National Insurance at 8% between £12,570 and £50,270 and 2% above. The real cost to you is how much lower your take-home pay is than it would be with no pension contribution at all, after any extra relief you can claim. The amount going into the pension is the same in every case.

Worked examples

These figures come from running this calculator and were checked by hand against the GOV.UK rates.

Example 1: £30,000 salary, 5% contribution

The pension receives £1,500. With a net pay arrangement or relief at source, your take-home pay falls by £1,200, because 20% tax relief covers the rest. Under relief at source you pay £1,200 yourself and the provider adds £300. With salary sacrifice you also save 8% National Insurance on £1,500 (£120), so the cost to you is £1,080. Your employer saves £225 in employer National Insurance.

Example 2: £60,000 salary, 10% contribution

The pension receives £6,000. Net pay gives 40% relief through payroll, so the cost is £3,600. Relief at source gives the same final cost, but only once you claim the extra £1,200 of higher-rate relief; until then, your take-home pay is £1,200 lower. Salary sacrifice saves a further 2% National Insurance (£120), bringing the cost to £3,480.

Example 3: £110,000 salary, 10% contribution

An £11,000 contribution brings adjusted income down to £99,000, which restores the full Personal Allowance. Tax falls from £33,432 to £27,032, a saving of £6,400, so the cost under net pay is £4,600. Under relief at source you would need to claim £4,200 back from HMRC to reach the same cost. Salary sacrifice costs £4,380.

2026/27 rates used

Item	Rate or threshold
Personal Allowance	£12,570, reduced by £1 for every £2 of adjusted net income over £100,000
Basic rate	20% on taxable income up to £37,700
Higher rate	40% up to £125,140
Additional rate	45% above £125,140
Employee National Insurance	8% from £12,570 to £50,270, 2% above
Employer National Insurance	15% above £5,000 a year
Annual allowance	£60,000 (most people)

Assumptions and what this calculator does not cover

Scotland: the Income Tax bands are for the rest of the UK. Scottish taxpayers get relief at their own Scottish rates, and relief at source is paid at 20% even for starter-rate taxpayers.
Low earners: under a net pay arrangement, anyone earning less than the Personal Allowance gets no tax relief, while relief at source still adds 20%. The calculator shows this difference.
Minimum wage: salary sacrifice cannot take your pay below the National Minimum Wage. The calculator does not check this.
Employer contributions: your employer’s own contribution is not included.
Limits: it does not check the annual allowance, the tapered annual allowance for very high earners, or the rule that tax relief is limited to 100% of your earnings.
Other effects: a lower salary under salary sacrifice may affect mortgage applications, life cover based on salary, statutory pay and some benefits.

Changes to salary sacrifice from April 2029

The government has announced that from 6 April 2029, only the first £2,000 a year of pension contributions made through salary sacrifice will be free of National Insurance. Anything above that will be charged employee and employer National Insurance in the same way as ordinary pension contributions. Income Tax relief will not change. This calculator uses the 2026/27 rules, so the National Insurance saving it shows does not apply the future £2,000 cap.

Which method do I have?

Your payslip usually tells you. If the pension deduction appears before tax is calculated and your taxable pay is lower than your gross pay, it is probably a net pay arrangement. If your provider’s statements show tax relief being added to your payments, it is relief at source. With salary sacrifice, your gross salary itself is lower and the contribution may be listed as an employer payment.

Frequently asked questions

Is salary sacrifice always better?

It usually costs less because of the National Insurance saving, but it reduces your contractual salary. That can affect borrowing, statutory pay and some benefits, so weigh up the whole picture.

How do higher-rate taxpayers claim relief at source?

You can claim the extra relief through your Self Assessment tax return or by contacting HMRC. HMRC may adjust your tax code instead.

Does salary sacrifice reduce my National Insurance?

Yes. Your salary is lower, so you pay less employee National Insurance: 8% or 2% depending on your earnings. Your employer pays 15% less on the sacrificed amount above £5,000 a year.

Can pension contributions restore my Personal Allowance?

Yes. Contributions reduce adjusted net income, so they can reduce or remove the taper that applies between £100,000 and £125,140.

Sources

Rates for tax year 2026/27, last reviewed October 2026.

Results are estimates for planning, not financial or tax advice. See our terms and methodology.