Answers · UK 2025/26

Is salary sacrifice better than a personal pension contribution for getting tax relief?

Usually yes, because salary sacrifice also saves National Insurance. A £5,000 salary sacrifice for a higher-rate earner saves 40% Income Tax and 2% employee NI, and many employers add their 15% NI saving too, so the same gross pay buys a much larger pension contribution.

Last updated: 10 June 2026Last reviewed: 10 June 2026How we verify

Full answer

Both routes get the contribution into your pension, but salary sacrifice is generally more efficient because it reduces gross salary before National Insurance is calculated. Worked example for a higher-rate earner on £60,000 sacrificing £5,000: personal contribution route - you pay £5,000 from net pay, the pension adds 20% basic-rate relief making it £6,250 gross, and you reclaim a further 20% (£1,000) via Self Assessment, so the net cost is about £4,000 for £6,250 in the pension. Salary sacrifice route - your salary drops by £5,000, so you avoid 40% Income Tax (£2,000) and 2% employee NI (£100) on that slice, meaning the £5,000 only cost you £2,900 in lost take-home, and the full £5,000 goes in with no need to reclaim anything. On top of this, the employer saves 15% NI on the sacrificed £5,000 (£750), and many generous employers add some or all of that to your pension, boosting it further. The annual allowance of £60,000 still applies, and sacrifice cannot take your pay below the National Living Wage of £12.71 an hour. Salary sacrifice also lowers adjusted net income, which can help reclaim Personal Allowance in the £100,000 to £125,140 band or avoid the High Income Child Benefit Charge between £60,000 and £80,000. Use the salary sacrifice calculator and the pension calculator to compare. For the rules see gov.uk.