Salary sacrifice worked example
A £40,000 salary with a £4,000 pension sacrifice leaves £29,439.60 a year instead of £32,319.60. Income tax falls by £800.00 and employee National Insurance by £320.00. The employer saves £600.00.
Salary sacrifice is a cut in contractual cash pay. For a pension, the employer pays the sacrificed amount into the pension. It is not a benefit in kind, so both income tax and employee National Insurance are worked out on the lower salary. That is the difference from the pension box on the take-home pay calculator, which uses a net-pay percentage and does not reduce National Insurance. The rules are on GOV.UK salary sacrifice for employers.
2026/27 rates used
| Item | 2026/27 |
|---|---|
| Income tax, England, Wales and Northern Ireland | 20% to £50,270, then 40%, then 45% |
| Employee National Insurance | 8% from £12,570 to £50,270, then 2% |
| Employer National Insurance | 15% above £5,000 |
| Class 1A on benefits | 15% |
| Zero-emission company car | 4% of the list price |
| National Living Wage, 21 and over | £12.71 an hour from 1 April 2026 |
Scotland
The same £40,000 and £4,000 sacrifice saves £840.00 of Scottish income tax and £320.00 of National Insurance. Take-home goes from £32,254.53 to £29,414.53. National Insurance does not change between nations. Scottish bands are on mygov.scot and the Scottish tax calculator.
£110,000 and the personal allowance
Sacrificing £10,000 from £110,000 brings adjusted income back to £100,000, so the full £12,570 Personal Allowance is restored. Income tax falls by £6,000.00 and employee National Insurance by £200.00. Cash take-home falls by £3,800.00, not by £10,000. The employer saves £1,500.00 of National Insurance. Above £100,000 the allowance tapers by £1 for every £2, which is why the tax saving is this large.
Electric cars
Cars of 75g/km CO2 or less keep the normal company-car charge. They are not valued at the higher of the salary given up and the benefit. For 2026/27 a zero-emission car is 4% of the list price, from the HMRC appropriate-percentage table. A £45,000 salary, a £6,000 sacrifice and a £40,000 list price produce a benefit of £1,600.00. Income tax saved is £880.00 and employee National Insurance saved is £480.00, £1,360.00 together. Take-home falls by £4,640.00. The employer saves £900.00 of Class 1 National Insurance and pays £240.00 of Class 1A at 15%, so the net employer saving is £660.00. Employee National Insurance is not charged on the car benefit. Cars above 75g/km use the higher of the salary given up and the benefit. This page does not calculate that comparison.
Cycle to work
A qualifying bicycle and safety equipment are exempt, so the sacrificed salary is not replaced by a benefit while the hire lasts. On a £32,000 salary, sacrificing £1,200 saves £240.00 of income tax and £96.00 of employee National Insurance (£336.00 together). Take-home falls by £864.00. The employer saves £180.00. A later transfer of the bike for less than market value can be a taxable benefit. The calculator does not add a residual value.
Frequently asked questions
How much tax and National Insurance does a pension salary sacrifice save in 2026/27?
Sacrificing £4,000 from a £40,000 salary saves £800.00 of income tax and £320.00 of employee National Insurance in England, Wales and Northern Ireland. Cash take-home falls from £32,319.60 to £29,439.60. The employer also saves £600.00 of Class 1 National Insurance.
Does salary sacrifice work differently in Scotland?
National Insurance is the same. Scottish income tax is not. The same £4,000 sacrifice from £40,000 saves £840.00 of Scottish income tax and £320.00 of National Insurance. Take-home falls by £2,840.00.
How is an electric car salary sacrifice taxed in 2026/27?
A car with CO2 of 75g/km or less is still taxed as a company car, not as the salary given up. A zero-emission car is 4% of the list price. The employee pays income tax on that benefit and does not pay employee National Insurance on it. The employer pays Class 1A National Insurance at 15% on the benefit.