Salary sacrifice calculator

Use this calculator to work out how much you save with salary sacrifice. Enter your current salary and the amount you want to sacrifice. The calculator shows your tax and National Insurance savings, plus your new take-home pay.

What is salary sacrifice?

Salary sacrifice is an arrangement where you give up part of your salary in exchange for a non-cash benefit. Your employer provides the benefit (pension contribution, bike, company car) instead of paying you that portion of salary.

Because you never receive the sacrificed salary, you never pay Income Tax or National Insurance on it. This saves you money compared to receiving the salary and buying the benefit yourself.

How much do you save?

Your saving depends on your Income Tax band:

Income band Income Tax National Insurance Total saving
Basic rate (£12,571–£50,270) 20% 12% 32%
Higher rate (£50,271–£125,140) 40% 2% 42%
Additional rate (£125,141+) 45% 2% 47%

Pension salary sacrifice

When you sacrifice salary for a pension contribution, your employer pays the sacrificed amount directly into your pension. You save tax and NI on the full amount. Your employer also saves 13.8% Employer's National Insurance, which many employers add to your pension contribution.

Example: You sacrifice £5,000. You're a basic-rate taxpayer, so you save £1,600 (32%). Your employer saves £690 (13.8%) and adds it to your pension. Your pension receives £5,690, and your take-home pay falls by only £3,400.

Cycle to work scheme

Your employer buys a bike and equipment (up to £1,000, or unlimited if your employer allows) and loans it to you. You sacrifice salary to cover the cost over 12 to 36 months. After the hire period, you can buy the bike for a small residual value (3-7% of the original price).

You save tax and NI on the sacrificed amount. The bike must be used mainly for commuting to work.

Example: A £1,000 bike costs a basic-rate taxpayer £680 after 32% tax and NI savings. After the hire period, you pay £25-£70 to own it.

Electric vehicle salary sacrifice

Your employer leases an electric vehicle and provides it to you as a company car. You sacrifice salary to cover the lease cost. Because it's a company car, you pay Benefit-in-Kind (BiK) tax.

Electric vehicles have a 2% BiK rate for 2025-26. For a car with a list price of £40,000, you pay tax on £800 (2% of £40,000). A basic-rate taxpayer pays £160 tax per year. A higher-rate taxpayer pays £320.

Compare this to petrol and diesel cars, which have BiK rates of 25-37%. Salary sacrifice for EVs saves far more than for traditional cars.

What else can you salary sacrifice?

HMRC allows salary sacrifice for:

  • Pensions: Full tax and NI relief, no BiK charge
  • Cycle to work: Full tax and NI relief during hire period
  • Ultra-low emission vehicles: 2% BiK for EVs
  • Workplace nurseries: No tax or NI if employer-provided
  • Childcare vouchers: Closed to new joiners since 2018

Some employers offer salary sacrifice for gym memberships, health screenings, or mobile phones, but these usually carry a BiK charge equal to the benefit value, so the tax saving is minimal.

Limits and restrictions

Your salary after sacrifice must stay above:

  • National Minimum Wage (£11.44/hour from April 2024)
  • National Insurance Lower Earnings Limit (£6,396 per year for 2025-26)

Falling below the Lower Earnings Limit means you do not earn State Pension credits for that year. Avoid sacrificing salary if it takes you below this threshold.

Does salary sacrifice affect statutory pay?

Yes. Your reduced salary is used to calculate:

  • Statutory maternity, paternity, and adoption pay
  • Statutory sick pay
  • State Pension contributions

Most workplace schemes let you opt out temporarily (for example, before maternity leave) to protect these benefits.

How to set up salary sacrifice

Your employer must offer a salary sacrifice scheme. If they do, you sign an agreement to:

  • Reduce your contractual salary by a specified amount
  • Receive a non-cash benefit in return

This is a contract variation. You cannot reverse it mid-year unless your employer allows opt-outs at annual review dates.