Salary Sacrifice Calculator

Calculate the income tax and NI saving from salary sacrifice schemes including pension contributions, cycle to work, EV leasing and childcare. Uses 2026/27 HMRC rates.

Last updated: April 2026

Your details
Salary sacrifice amounts (annual)
Reduces gross pay before tax and NI are calculated.
Typical: £500–£1,000 bike cost spread over 12 months.
Monthly lease cost × 12. Benefit in kind at 3% of list price for EVs.
Salary sacrifice savings
Annual tax & NI saving
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Gross salary -
Total sacrifice amount -
Adjusted gross (post-sacrifice) -
Income tax saved -
NI saved -
Effective cost of £1,000 sacrifice -

How salary sacrifice works

Salary sacrifice (also called salary exchange) is an arrangement where you give up part of your gross salary in exchange for a non-cash benefit. Because the sacrifice reduces your gross pay before income tax and National Insurance are calculated, you pay less tax and NI than if you received the salary and paid for the benefit yourself. Your employer also pays less employers' NI (13.8% above the secondary threshold), and many employers pass some or all of this saving back to employees - particularly on pension contributions.

Pension sacrifice: the most valuable arrangement

Pension contributions via salary sacrifice are the most tax-efficient form of the scheme. A basic rate taxpayer contributing £3,000 to their pension via sacrifice saves 20% income tax plus 8% NI - an effective saving of 28% on the gross amount. For a higher rate taxpayer (40% income tax, 2% NI), the saving is 42%. This means a £3,000 pension contribution via sacrifice costs only £2,160 net for a basic rate taxpayer, and just £1,740 for a higher rate taxpayer - the pension receives £3,000 but the take-home pay reduction is much less.

EV salary sacrifice

Electric vehicle salary sacrifice has become increasingly popular. An employee leases an EV through their employer via sacrifice, paying no income tax or NI on the lease cost, and a benefit in kind charge of just 3% of the car's list price (2026/27 rate). For a higher rate taxpayer leasing a £35,000 EV, the benefit in kind charge is only £420 per year - significantly less than the combined income tax and NI saving on the sacrificed salary. This makes EV salary sacrifice one of the most tax-efficient ways to access a new electric car.

Frequently asked questions

Yes, potentially. Most mortgage lenders assess affordability based on your actual gross salary, not your post-sacrifice adjusted gross. Lenders are generally aware of salary sacrifice and will typically use your pre-sacrifice salary for affordability calculations if you can demonstrate the arrangement. However, some lenders may use the lower figure, which could reduce the amount they are willing to lend. Always declare salary sacrifice arrangements when applying for a mortgage and check how your chosen lender treats them.
No. Salary sacrifice cannot reduce your cash pay below the National Minimum Wage. This limits the amount that can be sacrificed for lower-paid employees. There is no upper limit for higher earners, though pension contributions are subject to the annual allowance (£60,000 in 2026/27) and the money purchase annual allowance (£10,000) if you have already flexibly accessed pension savings.
No - salary sacrifice is voluntary for employers. It requires a formal contractual change and HMRC approval for some scheme types. Pension salary sacrifice is the most commonly offered arrangement. The employer must formally reduce your contractual salary and provide the equivalent in a non-cash benefit. Many employers offer it for pensions because they also save employer NI on the sacrificed amount - a genuine win-win that incentivises employers to run the scheme.

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