Salary Sacrifice Calculator
Discover how much "free money" you can get from HMRC. Calculating the impact of pension contributions or EV schemes on your take-home pay has never been easier.
How Salary Sacrifice Works
Salary sacrifice is a contractual agreement where you voluntarily give up a portion of your gross salary in exchange for a non-cash benefit. Because your "official" salary is lower, you pay less Income Tax and National Insurance.
✓Tax Efficient
You save tax at your highest marginal rate (20%, 40%, or 45%).
✓NI Savings
You also save 8% (or 2%) on National Insurance contributions.
Electric Car Schemes
Leasing an Electric Vehicle (EV) through salary sacrifice can be up to 40% cheaper than a personal lease. However, you must pay Benefit in Kind (BiK) tax.
- BiK Rate: Currently 2% until April 2025. This is extremely low compared to petrol cars (often 30%+).
- Includes Everything: Most schemes include insurance, maintenance, and tires in the gross cost, maximizing your tax savings.
- Impact: The calculator subtracts the small BiK tax from your large income tax saving to show the true net cost.
Pension Boosting
Salary sacrifice is the most efficient way to contribute to a pension. Unlike "Relief at Source" (where you claim tax back later), the saving is immediate.
The "Free Money" Trick
When you sacrifice salary, your employer saves 13.8% in Employer National Insurance. Many employers are willing to pay some or all of this saving into your pension pot.
Use the "Employer passes on NI?" toggle in the calculator to see this effect. It can boost a £1,000 contribution to £1,138 at no extra cost to you or your boss.
Things to Watch Out For
Lenders usually look at your post-sacrifice salary. A lower salary might reduce how much you can borrow.
Death-in-service benefits are often a multiple of salary (e.g. 4x). Check if your employer uses your original or reduced salary for this calculation.
Last updated: December 2025