Salary Sacrifice Calculator

You agree with your employer to reduce your contractual salary by a set amount, which is then contributed to a benefit (pension, EV lease, bike, etc.) on your behalf. Because the sacrifice reduces your gross pay, you pay less income tax and National Insurance on a lower salary. Your employer also pays less employer NIC, and many employers pass some or all of this saving back to you.

Yes, for most employees. A personal pension contribution gets income tax relief only. A salary sacrifice pension also saves employee NIC (8% at basic rate, 2% at higher rate) and employer NIC (15%). On a £5,000 contribution, a basic-rate taxpayer saves around £1,400 total vs £1,000 through a personal contribution — a meaningful difference, especially at scale.

Your reduced salary can affect: mortgage affordability assessments (some lenders use contracted salary), life cover and income protection linked to salary multiples, statutory maternity/paternity pay (based on average earnings), state pension (if salary drops below the NI lower earnings limit of £6,396). For most people with salaries well above £6,396 these don't apply, but check before committing to a large sacrifice.

Electric cars leased through an employer salary sacrifice scheme attract a Benefit in Kind (BiK) rate of just 3% for 2026/27 (rising 1% per year to a cap). This makes EV salary sacrifice extremely tax-efficient — a £40,000 EV has a BiK value of just £1,200/year, costing a basic-rate taxpayer £240/year in tax. Combined with NI savings on the sacrificed amount, the effective cost can be 40–60% cheaper than leasing privately.