Compare your net pay before and after pension salary sacrifice and see how much you save on tax and National Insurance.
This calculator provides estimates for guidance only. Salary exchange arrangements depend on employer terms. Always consult your employer or a qualified financial adviser before making changes.
Salary exchange (commonly called salary sacrifice) is one of the most tax-efficient ways to save into a workplace pension in the UK. Under a salary exchange arrangement, you agree to reduce your contractual salary by a set amount, and your employer makes an equivalent pension contribution on your behalf. Because your official salary is lower, you pay less income tax and National Insurance -- and your employer saves on employer NI too. For the 2026-27 tax year, a basic rate taxpayer exchanging GBP 5,000 of salary would save approximately GBP 1,000 in income tax (20%) and GBP 400 in National Insurance (8%), meaning their pension gets GBP 5,000 but it only costs them GBP 3,600 in net pay. Higher rate taxpayers save even more -- around GBP 2,000 in tax (40%) plus a smaller NI saving. Some employers go further and pass their own NI saving (15% of the exchanged amount) directly into your pension pot, making salary exchange even more attractive. This calculator shows you exactly how salary exchange would affect your take-home pay and your pension contributions, so you can make an informed decision about whether to participate.
To compare your pay before and after salary exchange: 1. Enter your current annual gross salary -- this is your salary before the exchange arrangement begins. 2. Enter the amount you want to exchange for pension contributions. This could be a fixed annual amount. Many employees exchange between 3% and 15% of their salary. 3. In the advanced options, toggle "Employer Passes NI Saving" if your employer adds their NI saving to your pension. Not all employers offer this, so check your pension scheme documentation. 4. Review the results showing your current net pay versus your new net pay after exchange, the tax and NI savings, and the total value going into your pension. The "Cost per GBP 1 of Pension" figure shows how much each pound of pension actually costs you in reduced take-home pay. 5. Use the comparison scenarios to see how the benefits change at different salary levels and exchange amounts.
The salary exchange calculator compares two scenarios: your pay before and after the salary exchange. Before exchange: Your full gross salary is subject to income tax and National Insurance. Net pay equals gross minus tax minus NI. After exchange: Your gross salary is reduced by the exchange amount. Tax and NI are recalculated on the lower salary. The difference in tax between before and after is your tax saving. The difference in NI is your NI saving. The employer NI saving is calculated as the exchange amount multiplied by 15% (the 2026-27 employer NI rate), for earnings above the GBP 5,000 secondary threshold. If the employer passes this saving to your pension, your total pension contribution increases. For example, exchanging GBP 5,000 on a GBP 40,000 salary: before tax is GBP 5,486, after tax on GBP 35,000 is GBP 4,486, saving GBP 1,000 in tax. Before NI is GBP 2,194.40, after NI on GBP 35,000 is GBP 1,794.40, saving GBP 400. Your net pay drops by GBP 3,600 (the exchange amount minus your tax and NI savings), but GBP 5,000 goes into your pension. The effective cost per pound of pension is GBP 0.72 -- meaning each GBP 1 of pension costs you only 72p in reduced take-home pay. The total benefit figure combines your tax saving, NI saving, and any employer NI pass-through to show the full financial advantage of salary exchange.
Inputs: Annual salary: GBP 40,000, Exchange amount: GBP 5,000, Employer NI pass-through: No
Inputs: Annual salary: GBP 60,000, Exchange amount: GBP 10,000, Employer NI pass-through: No
Inputs: Annual salary: GBP 40,000, Exchange amount: GBP 5,000, Employer NI pass-through: Yes
Salary exchange reduces your official salary, which can affect other benefits linked to your salary such as mortgage affordability assessments, statutory maternity pay, statutory sick pay, and life insurance cover. Your employer cannot reduce your salary below the National Minimum Wage through salary exchange. Always check with your employer about the specific terms of their salary exchange scheme. This calculator uses 2026-27 tax year rates.