See what sacrificing salary into a pension saves, for you and your employer, and what the April 2029 cap will change. A working figure, not advice — talk to Buzz about your payroll.
Salary sacrifice reduces your gross pay, and gross pay matters elsewhere.
Mortgage affordability, statutory maternity pay and some benefits are worked out from gross salary, and sacrifice cannot take pay below the National Minimum Wage. This tool covers pension sacrifice for an employee on England and Northern Ireland rates. Talk to Buzz before setting a scheme up.
Your figures
Enter your salary and the amount sacrificed, then click Calculate.
The basics
How salary sacrifice works
Salary sacrifice swaps part of your gross pay for an employer pension contribution. Because the money never counts as salary, neither you nor your employer pays National Insurance on it, and income tax relief comes automatically at your marginal rate rather than being claimed back.
Employers save too. The employer saves secondary National Insurance at 15% on everything sacrificed. Some keep that saving; better schemes add it to the employee's pension, which costs the employer nothing and is worth real money over a career. It is always worth asking which yours does.
The change coming in April 2029. At Budget 2025 the government announced that from 6 April 2029, only the first £2,000 of employee pension contributions made through salary sacrifice each year will keep the National Insurance exemption. Above that, both employer and employee National Insurance will apply as with any other workplace pension contribution. Income tax relief is unaffected.
It does not arrive until 2029 — but if you are designing a scheme now, it belongs in the modelling.
What it can cost you. Sacrifice reduces gross salary, and gross salary is what mortgage lenders assess and what statutory maternity pay is based on. It also cannot take pay below the National Minimum Wage, which rules it out for lower-paid staff.
Frequently asked questions
Common questions about salary sacrifice
Is salary sacrifice worth it?
For most higher-rate taxpayers, clearly yes — you avoid 40% income tax and 2% employee National Insurance on the sacrificed amount, and it goes into your pension gross. For basic-rate taxpayers the saving is smaller but still real, because the 8% NI is avoided outright rather than merely relieved. The question is less whether it saves tax and more whether the reduction in gross salary costs you something elsewhere.
Does my employer have to offer it?
No. It requires a formal variation to your employment contract, a scheme the employer sets up, and payroll that handles it correctly. Some employers decline because of the administration; some because they want to keep the NI saving simple. If yours does not offer it, asking is reasonable — it costs the employer nothing and can save them money.
What does the employer get out of it?
They save employer's National Insurance at 15% on everything sacrificed. On £6,000 sacrificed that is £900 a year, per employee. Some employers keep it; better schemes pass it into the employee's pension, which costs the employer nothing versus the original salary and is worth a great deal over a career. It is always worth asking which yours does, because the difference compounds.
What is changing in April 2029?
From 6 April 2029, only the first £2,000 of employee pension contributions made through salary sacrifice each year will keep the National Insurance exemption. Above that, both employer and employee National Insurance will apply as they would to any other workplace pension contribution. Income tax relief is unaffected, so sacrifice does not become pointless — it becomes less generous, and mainly for people sacrificing large sums.
Should I stop sacrificing because of the 2029 change?
No. It is nearly three years away and the tax relief survives it. What it does change is scheme design: if you are setting something up now, model it on both the current and the post-2029 position rather than only today's. For someone sacrificing £2,000 or less a year, nothing changes at all.
Will it affect my mortgage?
It can. Lenders assess affordability on gross salary, and sacrifice reduces it — so £60,000 sacrificing £6,000 is often assessed as £54,000. Some lenders will add the pension contribution back if you ask and evidence it; many will not. If you are applying for a mortgage in the next few months, it is usually worth pausing the sacrifice rather than arguing with an underwriter.
What else does it affect?
Statutory maternity, paternity and adoption pay are calculated from earnings during a set reference period, so sacrificing across that window reduces them. Statutory Sick Pay, redundancy pay and death-in-service cover set as a multiple of salary can all be affected. And sacrifice cannot take pay below the National Minimum Wage — which is a hard legal floor, not a guideline, and rules the arrangement out entirely for lower-paid staff.
Can I sacrifice for things other than pension?
Yes — the main survivors of the 2017 crackdown are pension contributions, employer-provided cycles under Cycle to Work, ultra-low-emission cars, and workplace nurseries. Most other benefits lost their tax advantage and are now taxed on the higher of the salary given up or the benefit's value, which usually removes the point of the exercise.
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A higher-rate taxpayer on £60,000 sacrifices £6,000 a year into their pension.
Income tax avoided at 40%£2,400
Employee NI avoided at 2%£120
Reduction in take-home pay£3,480
Amount landing in the pension£6,000
So £6,000 into the pension costs £3,480 of take-home pay. The employer separately saves £900 of National Insurance.
If the employer passes that saving on, the pension receives £6,900 for the same £3,480 — a fifth more, for a decision that costs the employer nothing. Over twenty years of contributions that difference is not a rounding error.
The same sacrifice for a basic-rate taxpayer avoids 20% tax and 8% NI: a £6,000 contribution reduces take-home by £4,320. Less dramatic than the higher-rate case, but the NI element is a genuine saving rather than relief that would have come anyway.
What to do with the answer
Before you set one up
Ask whether the employer passes on their NI saving. It is 15% of whatever you sacrifice, it costs them nothing to hand over, and a surprising number of employees never ask.
Pause it if you are applying for a mortgage. Lenders assess the reduced gross salary. A few months of not sacrificing is cheaper than a smaller loan.
Check the National Minimum Wage floor. Sacrifice cannot take anyone below it, which rules the scheme out for part of the workforce in many businesses.
Think about parental leave timing. Statutory maternity and paternity pay are based on earnings in a reference period. Sacrificing through it reduces them.
Model the 2029 cap if you are sacrificing heavily. Above £2,000 a year, NI will apply from April 2029. Income tax relief is untouched, so it is a trim rather than a cliff.
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