1. What is Salary Sacrifice?

Salary sacrifice is an arrangement where an employee gives up part of their salary in exchange for benefits. The sacrificed amount is deducted from gross pay before tax and National Insurance calculations, potentially reducing tax liabilities.

2. How Net Pay is Calculated

The calculator uses the following formula:

Where:

• Gross Pay — Total salary before deductions
• Income Tax — Calculated on taxable income (gross pay minus salary sacrifice) using 2025-26 tax brackets
• National Insurance — Calculated on taxable income using 2025-26 NI rates
• Salary Sacrifice — Amount sacrificed for benefits

3. Benefits of Salary Sacrifice

Details: Salary sacrifice can reduce income tax and National Insurance contributions, potentially increasing take-home pay. Common sacrifice schemes include pensions, childcare vouchers, and cycle-to-work schemes.

4. Using the Calculator

Tips: Enter your annual gross salary and the amount you wish to sacrifice. The calculator will show your estimated tax, NI, and net pay for the 2025-26 tax year.

5. Frequently Asked Questions (FAQ)

Q1: Is salary sacrifice legal?
A: Yes, salary sacrifice is a legal arrangement, but the contract must be changed to reflect the reduced salary.

Q2: What can I sacrifice salary for?
A: Common options include pension contributions, childcare vouchers, cycle-to-work schemes, and ultra-low emission cars.

Q3: Does salary sacrifice affect my pension?
A: It depends on the scheme. Some workplace pensions use pre-sacrifice salary for calculations, protecting your pension.

Q4: Are there limits to salary sacrifice?
A: Yes, your pay after sacrifice cannot fall below the National Minimum Wage. Some benefits have annual limits.

Q5: Can I opt out of salary sacrifice?
A: This depends on your employer's scheme rules. Some allow changes at certain times, others are fixed for a period.