Salary Sacrifice: What You Are Really Trading
Less take-home now, more pension later, and four side effects nobody mentions: mortgage capacity, maternity pay, sick pay and the child benefit charge.
Salary sacrifice converts pay you would have been taxed on into a pension contribution that escapes National Insurance as well as income tax. For most people paying into a pension anyway it delivers the same pension for less take-home, which makes it the right answer more often than not.
What is less well advertised is that it lowers your contractual salary, and four other things in your life are calculated from that number.
The same contribution, three ways
| Method | Income tax | National Insurance | From your pay | Take-home | A month |
|---|---|---|---|---|---|
| Net pay arrangement | £7,672 | £3,110 | £4,400 | £39,818 | £3,318.17 |
| Relief at source | £9,432 | £3,110 | £3,520 | £38,938 | £3,244.83 |
| Salary sacrifice | £7,672 | £3,022 | £0 | £39,906 | £3,325.50 |
Net pay and salary sacrifice produce the same income tax; only sacrifice also cuts National Insurance, which is why it wins on take-home for an identical pot. Relief at source looks worst here because the payroll only gives you basic rate relief — a higher rate taxpayer has to claim the rest separately, and a great deal of it goes unclaimed every year.
Sacrifice has a cost that does not show up in this table. It lowers the earnings figure used for statutory maternity and sick pay, for student loan deductions, and for what a mortgage lender will consider. The salary sacrifice guide sets out the whole trade.
The four things it quietly moves
Mortgage capacity. Lenders assess the salary on your payslip. Sacrificing 10% can reduce a four-times offer by roughly four times the sacrifice.
Statutory maternity and sick pay. Both use average weekly earnings in a reference period. Sacrifice during that period reduces them.
Student loan. In your favour: sacrifice reduces the earnings the deduction is based on, which a net pay pension does not.
Adjusted net income. Also in your favour, and sometimes decisively — it can take you out of the Child Benefit charge or the Personal Allowance taper entirely.
The 2029 change
From 6 April 2029, sacrificed pension contributions above £2,000 a year will attract both employee and employer National Insurance. Income tax relief is untouched. It does not affect 2026/27, 2027/28 or 2028/29, so nothing above is discounted for it.
Questions people actually ask
Is salary sacrifice worth it?
Does salary sacrifice affect my state pension?
The numbers this sits on
| Salary | Income tax | National Insurance | Take-home | A month | Effective rate |
|---|---|---|---|---|---|
| £25,000 | £2,486 | £994 | £21,520 | £1,793 | 13.9% |
| £35,000 | £4,486 | £1,794 | £28,720 | £2,393 | 17.9% |
| £45,000 | £6,486 | £2,594 | £35,920 | £2,993 | 20.2% |
| £60,000 | £11,432 | £3,210 | £45,358 | £3,780 | 24.4% |
| £85,000 | £21,432 | £3,710 | £59,858 | £4,988 | 29.6% |
| £110,000 | £33,432 | £4,210 | £72,358 | £6,030 | 34.2% |
Every figure in that table is computed from the published 2026/27 rates by the same engine that runs the calculators on this site, so a number in an article and a number in a calculator can never drift apart. National Insurance uses the statutory period thresholds real payroll uses, which is why these figures reconcile with a payslip rather than nearly reconciling with one.
| Salary | England, Wales, NI | Scotland | With a Plan 2 loan | Keep from the next £1,000 |
|---|---|---|---|---|
| £28,000 | 28.0% | 28.0% | 28.0% | £720.00 |
| £40,000 | 28.0% | 29.0% | 37.6% | £720.00 |
| £52,000 | 42.0% | 44.0% | 51.6% | £580.00 |
| £65,000 | 42.0% | 44.0% | 50.4% | £580.00 |
| £105,000 | 62.0% | 69.5% | 70.4% | £380.00 |
| £130,000 | 47.0% | 50.0% | 56.6% | £530.00 |
Work it out for yourself
- Take-home pay calculatorThe main calculator, all four UK nations.
- Pay rise calculatorWhat a raise really adds.
- Salary sacrificeWhat you are trading.
- Tax code checkerWhat each letter and prefix does.
Figures on this page are for the 2026/27 tax year (6 April 2026 to 5 April 2027) and were last checked on 29 August 2026. Every rate we use is listed on the sources page.