Salary Exchange Pension Calculator (UK)
See how much you could save in Tax and National Insurance by using Salary Exchange.
Standard Contribution
Salary Exchange
Increased Take-Home Pay with Salary Exchange
£0.00 per year
About the Tool
A Salary Exchange (often called Salary Sacrifice) is a popular and tax-efficient arrangement between you and your employer. You agree to reduce your gross salary by an amount equal to your pension contribution. In return, your employer pays your total pension contribution directly into your pension pot. Because your stated salary is lower, both you and your employer pay less National Insurance, and you pay less Income Tax. This calculator shows you the potential increase in your take-home pay as a result.
Key Features of Our Tool
- Clear Comparison: Instantly see the difference in your take-home pay between a standard pension contribution and a salary exchange arrangement.
- Tax & NI Savings: The calculator automatically works out your savings based on current UK tax and National Insurance bands.
- Employer Savings: It also calculates your employer’s National Insurance saving, which they may choose to add to your pension pot.
- Simple & Fast: Designed for ease of use, you can get a clear estimate in seconds on any device.
How To Use This Tool
- Enter Your Gross Salary: Input your total annual salary before any deductions.
- Add Your Contribution: Enter the percentage of your salary you contribute to your pension (e.g., 5%).
- Add Employer’s Contribution: Enter the percentage your employer contributes (e.g., 3%).
- Click “Calculate Savings”: The tool will instantly display a side-by-side comparison of your finances.
Frequently Asked Questions
1. Is Salary Exchange suitable for everyone?
It is highly beneficial for most, but not all, employees. If the salary reduction takes your earnings below the National Minimum Wage or certain benefit thresholds, it may not be right for you. Always consult with your HR department.
2. Does this affect my mortgage application or other salary-based benefits?
Potentially, yes. Since your official salary is lower, it could affect things like life insurance cover or mortgage lending calculations. Many lenders are familiar with salary exchange and will consider your original, higher salary, but you should always check.
3. What happens to my employer’s NI savings?
Some employers pass their National Insurance savings on to you by adding them to your pension contributions, further boosting your retirement pot. Our calculator assumes they keep this saving, so your actual benefit could be even higher. Check your company’s policy.
4. Are the tax calculations accurate?
This calculator uses the standard 2024/2025 tax and National Insurance bands for England, Wales, and Northern Ireland. It provides a very good estimate for most people but does not account for complex tax situations. It is for informational purposes only.