Calculator
Salary sacrifice pension calculator (2026/27)
With a side-by-side PAYE vs umbrella comparison. The differentiator: in umbrella mode the employer NI saving (15%) and apprenticeship levy (0.5%) on the sacrificed amount flow back into your pension, a 15.5% bonus contribution that standard PAYE keeps with the employer.
Reviewed 28 April 2026 · 2026/27 rates verifiedPension contribution (PAYE mode)
£5,000
Reduces your take-home by £3,600 · multiplier 1.39× (£ in pot / £ given up)
Show full breakdown
Where the maths goes
| Gross salary (before sacrifice) | £50,000.00 |
|---|---|
| Sacrifice amount | −£5,000.00 |
| Net take-home WITHOUT sacrificeBaseline: full PAYE on the original gross | £39,519.60 |
| Net take-home WITH sacrificePAYE on (gross − sacrifice) | £35,919.60 |
| Reduction in take-home | −£3,600.00 |
| Income tax savedOn the sacrificed amount, at your marginal rate | +£1,000.00 |
| Employee NI saved8% basic / 2% above UEL | +£400.00 |
| Employer NI savedStays with your employer — NOT in your pension pot | +£750.00 |
| Pension pot valueSacrifice amount only | £5,000.00 |
PAYE vs umbrella at your inputs
Same £50,000 gross and £5,000 sacrifice. The umbrella mode adds the recovered employer NI + apprenticeship levy to your pot — that 15.5% bonus is the structural advantage.
| PAYE | Umbrella | |
|---|---|---|
| Pension pot value | £5,000 | £5,775 |
| Reduction in take-home | £3,600 | £3,600 |
| Multiplier | 1.39× | 1.60× |
The umbrella advantage requires the umbrella to actually pass the ER NI saving through (good FCSA-accredited umbrellas do; not all do). Confirm with yours before assuming the multiplier in this calculator applies to your specific umbrella.
How salary sacrifice works
Salary sacrifice is a contractual arrangement: you give up part of your gross salary in exchange for the employer making an equivalent (or larger) pension contribution. The sacrificed amount never reaches your bank account, so it never enters your taxable pay.
What you save personally
On the sacrificed amount you avoid:
- Income tax at your marginal rate (20% basic / 40% higher / 45% additional)
- Employee National Insurance at 8% (basic-rate territory) or 2% (above the upper earnings limit)
- Student loan repayments at 9% (Plans 1/2/4/5) or 6% (Postgrad portion under multi-plan rule)
What the employer saves (and where it goes)
On the sacrificed amount the EMPLOYER avoids 15% employer NI (above the £5,000 secondary threshold) and 0.5% apprenticeship levy. Where this saving goes depends on your employment structure:
- Standard PAYE:the employer keeps the saving by default. Some employers contractually share a portion (for example, “we'll add 50% of our ER NI saving to your pension”), check your workplace pension scheme's rules.
- Umbrella:the umbrella's pay-bill cost is fixed at (assignment − margin). Any ER NI saving has nowhere to go except back into your compensation — typically the umbrella adds it to your pension contribution. £1,000 of sacrifice becomes ~£1,155 in the pot.
Why the umbrella mode often beats personal SIPP contributions
For a contractor on £500/day inside-IR35 via umbrella with roughly £55k of gross taxable salary (after umbrella margin and ER NI come out), sacrificing £10k into pension via the umbrella nets:
- Pension pot: £10,000 sacrifice + £1,500 ER NI flow-back + £50 apprenticeship-levy flow-back = £11,550 (the ER NI saving is 15% × £10k since the whole sacrifice is above the £5k secondary threshold; AL is 0.5% × £10k)
- Personal cost:~£6,538/year reduction in net take-home, made up of: £2,946 income tax saved (£4,730 of the sacrifice is in higher-rate territory at 40%, £5,270 in basic at 20%) + £516 employee NI saved (most of the sacrifice at 8% between PT and UEL, the top slice at 2% above UEL) + £6,538 of post-sacrifice gross take-home that you don't receive
- Multiplier: £11,550 / £6,538 ≈ 1.77×
Compared to a personal contribution + RAS strategy, the umbrella sacrifice route adds the employer NI flow-back and saves the employee NI portion, both of which RAS doesn't cover. The structural difference is ~10–15% more in the pot for the same personal cost.
What this calculator doesn't cover
- Carry-forward of unused allowance.Up to 3 prior years of unused annual allowance can be added to the current year's £60k. Calculator only checks the current year. Above £60k current-year contributions, model carry-forward with your accountant or pension provider.
- Pre-existing employer matching.Some employers match employee contributions up to a percentage. Calculator assumes you're sacrificing in addition to any matching, adjust your sacrifice figure if your employer's matching contribution is already counted.
- Mortgage affordability impact.Lenders differ on whether they use gross-of-sacrifice or post- sacrifice income for affordability. Most newer lenders use gross; older lenders may not. Check before sacrificing heavily if you'll need a mortgage within 12 months.
- Statutory benefits impact.SSP, SMP, and redundancy pay are typically calculated on post-sacrifice salary. Reducing sacrifice for a year before claiming is sometimes worthwhile for high earners; varies by employer's policy.
- National Minimum Wage floor.Sacrifice cannot reduce gross pay below NMW on an hourly basis. Calculator doesn't enforce this, be aware if your sacrifice is large relative to gross.
- Future tax on draw. 25% tax-free lump sum (LSA £268,275); 75% taxed as income at retirement-era marginal rate. Plan the long-term draw alongside the contribution decision.
Frequently asked questions
- Why is the multiplier different in umbrella vs PAYE mode?
- Standard PAYE: when you sacrifice £1,000 of salary, your employer pays £1,000 less salary AND saves the employer NI (15% above the secondary threshold) plus apprenticeship levy (0.5%) on the sacrificed amount. The pension contribution is just £1,000; the employer keeps the £155 of NI saving. Umbrella: the umbrella's pay-bill cost is fixed at (assignment − margin), so any ER NI + AL saving on the sacrificed amount has nowhere to go except back into your compensation, typically as a larger pension contribution. £1,000 sacrifice in umbrella mode becomes ~£1,155 in the pension pot. Same personal-side cost (same IT + EE NI saved); larger pot.
- Does my umbrella actually pass the ER NI saving through?
- Most FCSA-accredited umbrellas do. Some non-accredited or budget umbrellas keep the saving themselves, which means the umbrella mode in this calculator overstates your benefit. Confirm with your specific umbrella before assuming the multiplier in this calculator. Ask: 'When I salary-sacrifice into pension, does the employer NI saving on the sacrifice go to my pension pot or is it kept as additional umbrella margin?' A clear answer is what you want; vague answers mean check the contract.
- What's the multiplier comparison?
- Same input scenario. £50,000 gross salary, £5,000 sacrifice. PAYE mode: pension £5,000, take-home reduction £3,600, multiplier 1.39×. Umbrella mode: pension £5,775 (= £5,000 + £750 ER NI + £25 AL), take-home reduction £3,600, multiplier 1.60×. The umbrella mode's structural advantage is exactly the 15.5% bonus contribution, same personal cost, ~16% more in the pot.
- Is salary sacrifice better than personal contribution + Relief at Source?
- Almost always yes for higher-rate taxpayers. Salary sacrifice saves both income tax AND employee NI on the sacrificed amount; personal contribution + RAS gets you the 20% basic-rate top-up automatically and you claim the higher-rate top-up via self-assessment, but you don't avoid employee NI. Difference: roughly 8% of the sacrificed amount in basic-rate territory and 2% above UEL, small but consistent. Plus salary sacrifice is administratively cleaner (no SA claim needed for the higher-rate top-up). For higher-rate taxpayers, salary sacrifice + employer NI flow-back (umbrella case) is the highest-multiplier route.
- Can I sacrifice my whole salary?
- No, you must keep gross pay above the National Minimum Wage on a per-hour basis after sacrifice. For a full-time worker (35h/week, all 52 weeks) that's roughly £23,100/year minimum at the April 2026 NMW rate of £12.71/hour for 21+ workers. Sacrificing below NMW is a contractual breach for the employer (HMRC won't accept it; the employer pays a penalty and you may end up taxed on the 'sacrificed' amount as if it were salary). Realistically the cap is whatever leaves you above NMW; check with your umbrella or payroll if you're sacrificing close to the limit.
- What about the £60k annual allowance?
- Salary sacrifice contributions count toward the same £60k annual allowance as employer pension contributions and personal contributions, they're all combined. If you sacrifice £20k AND your employer makes a £10k matching contribution AND you personally contribute £30k via RAS, that's £60k total, at the limit. Above £60k the excess attracts the annual allowance charge. Carry-forward of unused allowance from prior 3 years can lift this temporarily.
- Does sacrifice affect statutory benefits?
- Some, depends on the benefit. Statutory Sick Pay, Maternity Pay, Mortgage / loan affordability assessments are based on POST-sacrifice gross salary; sacrifice can reduce the figure these are calculated on. State Pension contributions are generally unaffected for most contractors because Class 1 NI is paid based on what's earned post-sacrifice but you continue to accrue qualifying years as long as your post-sacrifice salary is above the Lower Earnings Limit (~£6,700/year). For new-build mortgages, lenders are increasingly using gross-of-sacrifice income; older lenders may not. Worth confirming before increasing sacrifice if you'll need a mortgage soon.
- What about student loans?
- Salary sacrifice reduces the income on which student loan repayments are calculated, so it saves 9% of the sacrificed amount (or 6% on Postgrad portion under HMRC's multi-plan rule). The calculator includes this saving when you select your plan. For someone with both undergrad + postgrad loans, the combined rate at the lowest-threshold plan is 9% + 6% above the postgrad threshold.
Related calculators
Contractor pension via Ltd
Different mechanic for Ltd directors, direct employer contribution from pre-tax profit.
Inside IR35 (umbrella)
The umbrella take-home calculation that this sacrifice applies to.
Take-home pay (PAYE)
Full PAYE chain, useful as the baseline before sacrificing.
Related guides
Reviewed: 28 April 2026 · See how we calculate · not financial advice.