1. What is Salary Sacrifice?

Salary sacrifice is an arrangement where an employee gives up part of their salary in exchange for non-cash benefits. This reduces taxable income, potentially lowering income tax and National Insurance contributions.

2. How Net Pay is Calculated

The calculator uses the following formula:

Where:

• Gross Pay — Total salary before deductions
• Income Tax — Calculated using UK 2025-26 tax brackets
• National Insurance — 12% of taxable income
• Salary Sacrifice — Amount sacrificed for benefits

3. UK Tax Brackets 2025-26

Tax Rates:

• Personal Allowance: £0 - £12,570 (0%)
• Basic Rate: £12,571 - £50,270 (20%)
• Higher Rate: £50,271 - £125,140 (40%)
• Additional Rate: Above £125,140 (45%)

4. Using the Calculator

Instructions: Enter your gross annual salary and any salary sacrifice amount. The calculator will show your estimated income tax, National Insurance, and net pay.

5. Frequently Asked Questions (FAQ)

Q1: What benefits can be salary sacrificed?
A: Common benefits include pension contributions, childcare vouchers, cycle-to-work schemes, and ultra-low emission cars.

Q2: Does salary sacrifice affect my pension?
A: It may reduce your qualifying earnings for pension calculations. Check with your employer about pension implications.

Q3: Is there a limit to salary sacrifice?
A: Your pay after salary sacrifice must not fall below the National Minimum Wage.

Q4: Are all employees eligible for salary sacrifice?
A: No, eligibility depends on your employment contract and employer's policies.

Q5: How accurate is this calculator?
A: It provides estimates based on standard assumptions. Actual deductions may vary based on individual circumstances.