Answers · UK 2025/26

Is salary sacrifice worth it in 2026?

For most employees, yes. Salary sacrifice into a pension saves both Income Tax and National Insurance in 2026/27 — a basic-rate taxpayer saves 28% (20% tax + 8% NI) and a higher-rate taxpayer saves 42%. Many employers add their NI saving too.

Last updated: 1 June 2026Last reviewed: 1 June 2026How we verify

Full answer

Salary sacrifice means giving up part of your gross salary in exchange for a non-cash benefit, most commonly a pension contribution, an electric car, or cycle-to-work equipment. Because the sacrifice happens before tax and National Insurance are calculated, it cuts both. For 2026/27, a basic-rate taxpayer saves 20% Income Tax plus 8% employee NI on the sacrificed amount — an effective 28% saving. A higher-rate taxpayer saves 40% tax plus 2% NI — 42%. Employers also save their 15% employer National Insurance on the sacrificed pay (the rate for 2026/27, on earnings above the £5,000 secondary threshold), and many generously add that saving to your pension. Worked example: a higher-rate taxpayer sacrifices £5,000 of salary into their pension. They lose £5,000 gross but only about £2,900 of take-home pay (because £2,100 would have gone in tax and NI anyway), yet £5,000 lands in their pension — plus potentially the employer’s £750 NI saving on top. Salary sacrifice is especially powerful for electric cars, where the Benefit-in-Kind rate is just 4% in 2026/27. Watch the downsides: sacrificing too much could take pay below the National Living Wage (not allowed) or reduce earnings-based benefits such as mortgage borrowing capacity, statutory maternity pay or life cover. It works the same in Scotland, where the tax saving reflects Scottish rates of up to 45%. Use the Salary Sacrifice and Pension calculators to model the trade-off.