Salary Sacrifice Calculator
Salary sacrifice lets you make contributions to your pension and helps to save on National Insurance at the same time. It is simple to follow and shows how you can benefit from doing this. You can calculate results based on either a fixed cash value or a certain proportion of your salary. This has been updated for the current tax year of 2022/23.
Using the calculator
- Input your total annual salary (the gross figure)
- Put in the annual contribution from your employer*
- Also put in the annual contribution that you pay*
- You can convert employee savings to pension contributions – simply select Yes or No
- Select the percentage of employer's National Insurance that the employer wants to retain
- Now press "Calculate" to get the results.
* Please note that these can be expressed as a cash amount or percentage of your salary
How does salary sacrifice work?
This works when an employer and employee come to an agreement over salary. You will see an alteration to your contract, where you agree to swap part of your salary in exchange for other benefits. These benefits are non-cash. It is often a pension contribution. These contributions are taken from your salary before tax and National Insurance are paid, so are tax efficient. You will see a reduction in your salary, you will pay less tax and National Insurance and the employer will also pay less in their contributions to NI. So, it can be a win-win situation.
This can only happen when your employer adjusts the terms of your contract. An employer can set up a salary sacrifice scheme and must mention the scheme in your contract or terms and conditions of employment. Your salary does not change overall. Technically you are still paid the same. It is just structured in a different way. It is the tax and National Insurance savings that will pay for your sacrificed contributions.
Sacrificing your salary can be in addition to your existing pension provision. Alternatively, this can be a cost-effective way for an employer to start a pension scheme, if they are setting out on this road.
What are the benefits for me?
You save on National Insurance on the amount of your salary that you sacrifice. This allows you to do one of two things:
- Retain the same pension contribution, so your take-home pay goes up
- Add the savings to your pension pot so it grows for your retirement
There is a NI saving for your employer. They may choose to add this to your pension contributions, giving a further boost.
You don't have to put in any work for this to happen. All the set-up is carried out by your employer.
Don't forget, as with any investment, that it can fall as well as rise. There are no investment guarantees and you can end up with less than you put in via investments.