Salary sacrifice calculator
What you give up, what you get back, and what it really costs out of your take-home pay. As a salary sacrifice car calculator it also charges the benefit in kind, which is the part that decides whether a salary sacrifice car is worth having at all, and the part most salary sacrifice car UK schemes leave you to work out yourself.
Updated 14 September 2026 · Tax year 2026/27
What the sacrifice is worth #
| Salary before | £45,000.00 |
| Sacrificed into your pension contribution | £6,000.00 |
| Salary after | £39,000.00 |
| Income Tax saved | £1,200.00 |
| Employee National Insurance saved | £480.00 |
| Take-home pay falls by | £4,320.00 |
Salary sacrifice explained #
You agree a lower salary in your contract. In exchange the employer provides something directly: pension contributions, a car, a bicycle. The money never counts as pay, so it is never taxed as pay. That is the whole mechanism, and it is why salary sacrifice UK schemes are worth more to a higher rate taxpayer than a basic rate one.
The catch is that since April 2017 most benefits have been caught by the optional remuneration rules, which tax you on whichever is higher: the salary you gave up, or the benefit's own value. That removes the Income Tax saving and leaves only the National Insurance. A short list of benefits is exempt, and it is the only list that matters.
| Exempt, the saving is real | Caught, Income Tax saving lost |
|---|---|
| Pension contributions into a registered scheme | Company cars above 75g/km |
| Employer-provided pensions advice | Private medical insurance |
| Workplace nurseries | Gym membership |
| Cycle to work: bicycles and safety equipment | Living accommodation |
| Cars with CO2 emissions of 75g/km or less, including electric | Company vans, other than zero emission |
| Childcare vouchers, only where the arrangement began on or before 4 October 2018 | Mobile phones beyond the one exempt handset |
Salary sacrifice pension explained #
A pension is the cleanest case, which is why a salary sacrifice pension calculator produces the largest numbers. The whole amount goes in gross, with no relief to claim back later and no wait for a higher rate top-up through Self Assessment. You save Income Tax and National Insurance on every pound, and the employer saves 15% as well.
Salary sacrifice pension UK arrangements have one band where they are worth far more than usual. Between £100,000.00 and £125,140.00 the personal allowance is withdrawn at £1 for every £2 earned, producing an effective rate above 60%. Sacrificing back down to £100,000.00 recovers the allowance in full, and the calculator above shows what that is worth on your own salary.
Contributions still count against the £60,000.00 annual allowance, and unused allowance from the previous three years can be carried forward.
What salary sacrifice costs you elsewhere #
- Mortgage applications are assessed on the reduced gross salary, though many lenders will add pension sacrifice back if you ask
- Statutory maternity pay is based on average earnings in the qualifying period, so sacrificing through it reduces the entitlement. See the SMP calculator
- Death in service and income protection are often a multiple of salary, and that is the sacrificed figure unless the scheme defines a notional salary
- Statutory redundancy pay uses a week's pay after sacrifice. The redundancy pay calculator shows the effect
- The salary sacrifice minimum wage floor cannot be crossed, which caps what lower paid staff can sacrifice at all. The calculator flags it when your figures breach it
Common questions #
What is salary sacrifice?
An agreement to give up part of your contractual pay in return for a non-cash benefit. Because the pay never reaches you, no Income Tax or National Insurance is charged on it, and the employer saves employer National Insurance at 15% as well.
How much does salary sacrifice save?
On an exempt benefit a basic rate taxpayer saves 20% Income Tax plus 8% National Insurance, so about 28%. A higher rate taxpayer saves about 42%. Between £100,000.00 and £125,140.00 the personal allowance taper pushes the effective saving past 60%.
Is salary sacrifice worth it for an electric car?
Usually yes, because a zero emission car is charged at only 4% of list price as a benefit in kind. You pay tax on that small figure while saving tax and National Insurance on the whole lease cost, which is why salary sacrifice electric car schemes work where petrol ones do not.
Does salary sacrifice work on a petrol or diesel car?
Barely. Above 75g/km CO2 the optional remuneration rules tax you on the higher of the salary given up or the benefit value, which cancels the Income Tax saving. Only the National Insurance saving survives.
Can salary sacrifice take me below minimum wage?
No. Sacrifice cannot reduce pay below the National Minimum Wage for the hours worked, currently £12.71 an hour for workers aged 21 and over. An employer who allows it is in breach whatever the employee agreed to.
Does salary sacrifice reduce my pension?
It increases what goes in, because the whole sacrificed sum is contributed gross with no relief to reclaim. It reduces your gross salary, which can matter for mortgage applications, statutory maternity pay and death in service cover.
What are the salary sacrifice benefits for employers?
Employer National Insurance at 15% on everything sacrificed. On the figures above that is £900.00 a year, which is why many employers pass some of it back into the scheme.
Which benefits are exempt from the optional remuneration rules?
Pensions, pensions advice, workplace nurseries, cycle to work, cars at 75g/km CO2 or less, and childcare vouchers where the arrangement began on or before 4 October 2018. Everything else is caught.
Is there a salary sacrifice limit?
No statutory cap on the sacrifice itself, but pay cannot drop below the National Minimum Wage, and pension contributions above the £60,000.00 annual allowance attract a tax charge.