Salary Sacrifice Calculator UK 2026/27
Calculate your exact tax and NI savings across Pension, Electric Car, Cycle to Work, and Childcare schemes. See your complete Before vs After take-home pay breakdown instantly.
Sacrifice Calculator
= — sacrificed per year
Salary Breakdown Visualised
What is Salary Sacrifice?
Salary sacrifice (also known as salary exchange) is a formal contractual arrangement between an employer and employee where the employee agrees to give up a portion of their gross salary in exchange for a non-cash benefit of equivalent value. Because the sacrifice occurs before Income Tax and National Insurance are calculated, both parties save money.
Employee Saves
Income Tax (20%, 40%, or 45%) plus Employee NI (8% or 2%) on the sacrificed amount — typically saving 28–47% depending on tax band.
Employer Saves
13.8% Employer NI on the sacrificed amount. Many enlightened employers pass this saving directly into the employee's pension pot.
How Does Salary Sacrifice Save Tax?
The mechanism is simple: your contract is amended to show a lower gross salary. HMRC then calculates tax on that lower figure. The benefit (pension, EV, bike, etc.) is provided on top but is either tax-exempt or taxed at a much lower rate.
Original salary: £50,000
Pension sacrifice: -£5,000
Taxable gross: £45,000
Income Tax saved: ~£1,000
Employee NI saved: ~£400
True cost of £5k pension: ~£3,600
Electric Car Salary Sacrifice — 2026/27 Guide
EV salary sacrifice is currently the most generously tax-advantaged perk in the UK for most higher earners. The government has locked the Benefit in Kind (BIK) rate for fully electric vehicles at 2% until 2027/28 to encourage the switch from fossil fuels.
Compare this to a conventional petrol car which can attract BIK rates of 25–37%. On a £40,000 salary, the monthly after-tax cost of a £35,000 EV through sacrifice can be lower than an equivalent personal 0% finance deal — while also slashing your tax bill and boosting employee mileage reimbursements.
When is Salary Sacrifice NOT Worth It?
- ⚠You earn close to Minimum Wage: Sacrifice cannot reduce your gross below the NLW/NMW. This limits availability for lower earners.
- ⚠Mortgage application pending: Lenders assess affordability based on gross salary. A lower gross may reduce how much you can borrow.
- ⚠Earnings close to £100,000: Sacrifice below £100k restores some Personal Allowance (worth 60% effective tax relief!) — this can be extremely powerful.
- ⚠State benefits affected: Some means-tested benefits (statutory pay, tax credits) are calculated on gross earnings. Very low earners should seek advice before sacrificing.
For full take-home pay modelling, use our Take-Home Pay Calculator or the PAYE Calculator to see the complete picture.
Frequently Asked Questions
How does salary sacrifice save tax?
Salary sacrifice reduces your gross salary before Income Tax and National Insurance are calculated. Because you pay tax on a lower figure, you save both Income Tax and Employee NI. For a basic rate taxpayer sacrificing £1,000, the true cost is only around £680 — an instant saving of £320.
Is salary sacrifice worth it for pensions?
Yes, for most workers. Every £1,000 sacrificed into a pension costs a basic rate taxpayer only ~£680 net (after tax at 20% and NI at 8%). Higher rate taxpayers save even more. Additionally, your employer saves the 13.8% Employer NI they would have paid on that salary — many employers pass this saving back to the employee's pension as an added contribution.
What is the BIK rate for electric cars in 2026/27?
For 2026/27, the Benefit in Kind (BIK) rate for fully electric vehicles is 2%. This makes EV salary sacrifice extremely tax efficient. On a £35,000 EV, the taxable benefit is only £700/year. A basic rate taxpayer pays just £140/year in BIK tax.
How much can I claim through the Cycle to Work scheme?
Under the standard Cycle to Work scheme, you can sacrifice up to £1,000 of salary before tax to purchase a bike and safety equipment. Under the extended 'Cyclescheme' or 'Bike2Work' tech schemes, higher amounts up to £5,000 are available. The tax and NI savings mean a £1,000 bike costs a basic rate taxpayer approximately £720.
Does salary sacrifice affect my state pension?
Salary sacrifice reduces your gross earnings for National Insurance purposes. For most workers, this has no impact on State Pension entitlement as long as your sacrificed salary stays above the Lower Earnings Limit (£6,396 in 2026/27). Workers earning close to this threshold should take advice before sacrificing salary.
Can I do salary sacrifice if I earn minimum wage?
No. Salary sacrifice cannot reduce your pay below the National Minimum Wage or National Living Wage. Employers must ensure that any sacrifice arrangement still leaves the employee receiving at least the legal minimum wage for every hour worked.