Salary Sacrifice Calculator 2025/26
See the real cost of salary sacrifice for pensions, electric vehicles, and cycle to work schemes. Includes employer NI savings.
This calculator provides estimates based on current HMRC rates and thresholds. It is not financial advice.
How it works
Enter your salary and sacrifice amount
Your gross salary, the amount you want to sacrifice, and the scheme type.
See your tax and NI savings
Breakdown of income tax, employee NI, and employer NI savings side by side.
Compare the real cost vs take-home impact
See how much your benefit actually costs you after tax savings.
What you'll get
Your total savings
£3,090
Calculation based on current HMRC rates for the 2025/26 tax year. Results are indicative only.
How salary sacrifice works in the UK
What is salary sacrifice?
Salary sacrifice is an arrangement where you agree to give up part of your gross salary in exchange for a non-cash benefit from your employer. Because your contractual salary is reduced before tax and National Insurance are calculated, both you and your employer pay less tax and NI on the sacrificed amount. Common salary sacrifice benefits include pension contributions, electric vehicles through salary sacrifice car schemes, cycle to work bikes, and childcare vouchers (for existing members).
How much do you save with salary sacrifice?
The savings depend on your tax band and the type of benefit. A 40% taxpayer sacrificing £5,000 into a pension saves £2,000 in income tax and approximately £400 in employee National Insurance, making the real cost only £2,600 instead of £5,000. A 20% taxpayer saves £1,000 in tax and £400 in NI on the same amount. Your employer also saves 13.8% employer NI (rising to 15% from April 2025) on the sacrificed amount, which some employers share with you as an additional pension contribution.
How does pension salary sacrifice work?
With pension salary sacrifice, you reduce your gross salary and your employer pays the equivalent amount directly into your pension. The contribution is made as an employer contribution, so neither you nor your employer pay National Insurance on it. This is more tax-efficient than making personal pension contributions, especially for higher rate taxpayers, because you save NI as well as income tax. The pension contribution still counts towards your annual allowance (£60,000 for 2025/26).
How does electric vehicle salary sacrifice work?
Electric vehicle (EV) salary sacrifice combines salary sacrifice with the low 2% BIK rate on electric cars. You sacrifice gross salary to lease an electric car, saving income tax and NI on the sacrificed amount. You then pay BIK tax on the car at just 2% of its P11D value. The combined savings can be 30-60% compared to leasing the same car personally. This makes salary sacrifice one of the cheapest ways to drive a new electric vehicle in the UK.
Does salary sacrifice affect your pension, mortgage, or benefits?
Salary sacrifice reduces your contractual salary, which can affect benefits linked to your earnings. Mortgage applications are typically based on your contractual salary, so salary sacrifice may reduce the amount you can borrow. Statutory maternity, paternity, and sick pay are based on your actual earnings, so a significant sacrifice could reduce these entitlements. However, employers cannot reduce your salary below the National Minimum Wage through salary sacrifice.
What is the employer NI saving?
Employers pay National Insurance at 15% (from April 2025) on salary above the secondary threshold. When you sacrifice salary, your employer saves this NI cost. Many employers pass some or all of this saving on to the employee, typically as an additional pension contribution. On a £5,000 salary sacrifice, the employer NI saving is approximately £750. Check with your employer whether they share this saving — it can significantly increase the value of salary sacrifice.
Which salary sacrifice schemes are exempt from the Optional Remuneration Arrangements rules?
The Optional Remuneration Arrangements (OpRA) rules removed the tax advantages of most salary sacrifice benefits from April 2017, but several key exemptions remain. Pension contributions, employer-provided childcare (for those already in schemes before April 2018), cycle to work bikes, and ultra-low emission vehicles (including electric cars) are all still exempt. These exempt benefits retain the full tax and NI advantages of salary sacrifice.
Rates sourced from authoritative data
Frequently Asked Questions
How much does salary sacrifice save me?
A 40% taxpayer sacrificing £5,000 saves approximately £2,400 in combined income tax and employee NI. A 20% taxpayer saves approximately £1,400 on the same amount. Your employer also saves 15% employer NI on the sacrificed salary. The exact saving depends on your income level and the type of benefit.
Does salary sacrifice reduce my take-home pay?
Yes, but by less than the sacrifice amount because of the tax and NI savings. If you sacrifice £5,000 as a 40% taxpayer, your take-home pay reduces by approximately £2,600 rather than £5,000, because you save £2,000 in income tax and £400 in employee NI on the sacrificed amount.
Can I salary sacrifice for a pension?
Yes. Pension salary sacrifice is one of the most popular and effective uses. Your salary is reduced and the equivalent is paid into your pension as an employer contribution. You save both income tax and employee National Insurance, making it more efficient than personal pension contributions. The contribution counts towards your £60,000 annual allowance.
Is salary sacrifice worth it for electric cars?
Electric vehicle salary sacrifice is extremely tax-efficient because you combine the income tax and NI savings of salary sacrifice with the 2% BIK rate on electric cars. Typical savings are 30-60% compared to personal leasing. This makes it one of the cheapest ways to drive a new electric car in the UK.
Does salary sacrifice affect my mortgage application?
It can. Most mortgage lenders assess affordability based on your contractual salary, which is reduced by salary sacrifice. Some lenders will consider your pre-sacrifice salary if you provide evidence. It is worth checking with your mortgage broker before entering a salary sacrifice arrangement if you plan to apply for a mortgage soon.
Can my salary be reduced below minimum wage?
No. Salary sacrifice cannot reduce your pay below the National Minimum Wage or National Living Wage. If a sacrifice would take you below this threshold, the arrangement is not valid for the amount below the minimum wage. This mainly affects lower-paid employees considering larger sacrifice amounts.
Does my employer save money too?
Yes. Your employer saves 15% (from April 2025) in employer National Insurance on the sacrificed salary. On a £5,000 sacrifice, this is approximately £750. Many employers pass part or all of this saving back to employees as an additional pension contribution or other benefit, making salary sacrifice even more valuable.
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