1. What is Pension Salary Sacrifice?

Salary sacrifice is an arrangement where an employee gives up part of their salary in exchange for pension contributions from their employer. This can result in tax and National Insurance savings for both the employee and employer.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• Gross Salary — Your total salary before any deductions
• Sacrifice — The amount you choose to sacrifice for pension contributions
• Income Tax — Calculated based on Scottish tax bands
• National Insurance — Calculated based on your reduced salary

Explanation: The calculator shows how much you'll take home after making pension contributions through salary sacrifice.

3. Importance of Salary Sacrifice Calculation

Details: Understanding the impact of salary sacrifice helps you make informed decisions about pension contributions and take-home pay.

4. Using the Calculator

Tips: Enter your gross salary, the amount you wish to sacrifice, and the calculated income tax and National Insurance amounts. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What are the benefits of salary sacrifice?
A: You pay less income tax and National Insurance, while your employer pays less National Insurance. More of your money goes into your pension.

Q2: Are there any downsides to salary sacrifice?
A: It may affect mortgage applications, statutory payments, and some state benefits as they're based on your reduced salary.

Q3: Is there a limit to how much I can sacrifice?
A: The annual allowance for pension contributions is £60,000 (2023/24), but this includes employer contributions.

Q4: How does this differ in Scotland?
A: Scotland has different income tax bands and rates compared to the rest of the UK, affecting the calculation.

Q5: Can I opt out of salary sacrifice?
A: Yes, but check your employment contract as there may be specific terms about when you can change your arrangement.