Salary sacrifice reduces the salary itself. You agree to be paid less, and your employer pays the difference into your pension instead. Because the money was never salary, it escapes both Income Tax and National Insurance — which is the whole mechanism, and why it beats paying into a pension out of money you have already been taxed on.

So sacrificing £1,000 does not cost £1,000. If you are a higher-rate taxpayer, that £1,000 was going to lose 40% to tax and 2% to National Insurance before it reached you, so giving it up costs about £580 of take-home and puts the full £1,000 into the pension.

The figure to look at is for every £1 of take-home given up. It is the honest exchange rate, and it changes with your salary rather than being a flat rule.

Where it is worth most

Between £100,000 and £125,140 the Personal Allowance is withdrawn by £1 for every £2 earned, so income in that band is taxed at an effective 60%. Sacrificing down through it is the single highest-value use of this, and the calculator shows it: the cost per pound falls sharply in that range.

What this does not cover

It assumes your employer offers salary sacrifice and passes on the full amount — some add their own National Insurance saving to your pension, which makes it better than shown here, and some do not. It ignores the annual allowance and any tapering of it, the effect on statutory pay, mortgage affordability assessments, and anything that depends on your gross salary rather than your take-home. It also assumes the sacrifice does not take you below the National Minimum Wage, which employers must not allow.

Where these rates come from

Every figure above is read from a dated rate file rather than written into the page, and each entry records the gov.uk page it came from. See Income Tax rates and Personal Allowances and rates and thresholds for employers on gov.uk.