See how much you and your employees save on tax and National Insurance with pension salary sacrifice. Updated for the 2026/27 tax year.
| Current (RAS) | With sacrifice | Difference | |
|---|---|---|---|
| Gross salary | £35,000 | £33,562 | |
| Income tax * | £4,486 | £4,198 | Already received |
| Employee NI | £1,794 | £1,679 | £115 |
| Pension contribution | £1,438 | £1,438 | |
| Take-home pay | £27,282 | £27,684 | +£115 |
* Your pension provider already claims 20% tax relief from HMRC on your behalf. With salary sacrifice, that relief stays in your take-home pay instead of going into your pension pot. The new saving from switching to salary sacrifice is the £115 National Insurance reduction.
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Based on an average salary of £35,000 with 5% employee contribution on qualifying earnings. Actual savings will vary by individual salary and contribution level.
Select benefits to see what your £5,392/year budget could fund. You could also add some or all of this to employee pensions instead.
Costs shown use mid-range indicative UK SME group rates (2026). Actual costs vary by provider, employee demographics, claims history, and cover level. PerkIQ can help you compare providers and find the right fit for your team.
Pricing sources: Medicash, Health Assured, Spill, Drewberry, Aviva, Going Private UK, GOV.UK
Salary sacrifice (also called salary exchange) is an arrangement where an employee agrees to reduce their gross salary in exchange for an equivalent employer pension contribution. Because the contribution comes from gross pay, before income tax and National Insurance are calculated, both the employee and the employer make savings.
The qualifying earnings method calculates pension contributions on earnings between the lower limit (currently £6,240) and the upper limit (£50,270). This is the default method for auto-enrolment. The basic pay method calculates contributions on your full salary, which typically results in higher contributions and greater savings.
If your current pension uses relief at source (the most common method), your provider already claims 20% basic rate tax relief. For basic rate taxpayers, the new saving from salary sacrifice is the 8% NI reduction. Higher rate taxpayers also gain extra tax relief (20% or 25% on income above the basic rate band) that they would otherwise need to claim via self-assessment. Employers save 15% in National Insurance on every pound of salary that is sacrificed.
From 6 April 2029, employee National Insurance will apply to salary sacrifice pension contributions above £2,000 per year. This will reduce the NI advantage for larger contributions, though the income tax saving will remain unchanged.
Salary sacrifice is just one part of your benefits package. PerkIQ scores your entire employee benefits offering across 7 categories and shows you exactly where to improve.
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