Calculate Pension Contributions UK 2026/27: Tax Relief + Net Cost
UK pension contribution calculator 2026/27 - the Income Tax and NI relief on a salary-sacrifice contribution and what it really costs your take-home pay.
See also: Auto-Enrolment 2026/27, salary sacrifice guide, 25% PCLS lump sum, tax relief mechanics.
Take-home pay
£30,880
17.8% effective tax rate Income Tax plus employee National Insurance as a percentage of your gross salary. Excludes pension, student loan, and HICBC.
- Monthly
- £2,573
- Weekly
- £594
- Daily
- £119
- Hourly
- £15.84
| Gross salary | £40,000 |
|---|---|
| Going into pension | −£2,000 |
| Tax + NI relief (salary sacrifice) | +£560 |
| Net cost to take-home | −£1,440 |
| Take-home after pension | £30,880 |
Assumes salary sacrifice: Income Tax and employee National Insurance are both worked out on the reduced pay. Most workplace schemes use a net pay arrangement or relief at source instead, which give Income Tax relief only, so for those the net cost is higher by the employee NI shown here (8% of the contribution in the main NI band, 2% above the Upper Earnings Limit). See salary sacrifice vs net pay vs relief at source.
How UK pension contributions save you tax in 2026/27
UK pension contributions get tax relief at your MARGINAL income tax rate. With salary sacrifice you also save employee National Insurance, and your employer saves its own NI. Four mechanisms exist, with very different efficiency:
- Salary sacrifice - most efficient. Gross salary reduced by contribution amount before IT + NI calculated.
- Relief at source (RAS) - basic-rate 20% added by provider; higher
- additional rate claimed via Self Assessment.
- Net pay - contribution deducted from gross pay before IT (but after NI); full IT relief at marginal rate. No employee NI saving.
- Direct from employer - employer pays directly to pension; no employee tax burden; employer claims as business expense.
Net cost per £100 gross pension contribution
| Marginal rate | Method | Net cost / £100 |
|---|---|---|
| Basic-rate (20%) | Salary sacrifice | £72 (20% IT + 8% NI) |
| Basic-rate (20%) | RAS or Net Pay | £80 (20% IT only) |
| Higher-rate (40%) | Salary sacrifice | £58 (40% IT + 2% NI) |
| Higher-rate (40%) | RAS or Net Pay | £60 (40% IT only) |
| Additional-rate (45%) | Salary sacrifice | £53 (45% IT + 2% NI) |
| Additional-rate (45%) | RAS or Net Pay | £55 (45% IT only) |
| 60% effective (£100,000-£125,140) | Salary sacrifice | £38 (60% IT + 2% NI) |
| 60% effective (£100,000-£125,140) | RAS or Net Pay | £40 (60% IT only; RAS after the Self Assessment claim) |
The “60% effective” rate applies in the £100,000-£125,140 Personal Allowance taper zone: the allowance goes down by £1 for every £2 of adjusted net income above £100,000 (ITA 2007 s.35, per gov.uk: Income over £100,000). A pension contribution reduces adjusted net income, so each £1 contributed in this band saves 60p of Income Tax, plus 2p of employee NI with salary sacrifice - a net cost of 38p for £1 of pension.
The pension contribution calculator above models salary sacrifice. If your scheme uses relief at source or a net pay arrangement, use the RAS / Net Pay rows: the NI part of the relief does not apply.
Annual Allowance 2026/27
Standard Annual Allowance £60,000 (Finance (No. 2) Act 2023 s.20, “Annual allowance increased”, from 2023/24 onwards). Up from £40,000 before April 2023.
Tapered Annual Allowance: applies only if your threshold income is over £200,000 and your adjusted income is over £260,000 (FA 2004 s.228ZA). The allowance then falls by £1 for every £2 of adjusted income above £260,000, to a minimum of £10,000 at £360,000. Per gov.uk, the allowance “will not be reduced if your threshold income for the current tax year is £200,000 or less, no matter what your adjusted income is”.
| Adjusted income (threshold income over £200,000) | Annual Allowance |
|---|---|
| £0 - £260,000 | £60,000 |
| £280,000 | £50,000 (tapered by £10k) |
| £300,000 | £40,000 |
| £320,000 | £30,000 |
| £340,000 | £20,000 |
| £360,000+ | £10,000 (minimum) |
“Adjusted income” starts from your net income and adds back your own pension contributions (net pay contributions and the gross amount of relief-at-source contributions) and your employer’s contributions for you. “Threshold income” starts from your net income, deducts the gross amount of any relief-at-source contributions, and adds back salary given up for pension under salary sacrifice or flexible remuneration arrangements made after 8 July 2015 - so a newer salary sacrifice does not take you under the £200,000 test. Both tests must be exceeded for the taper to apply.
Money Purchase Annual Allowance (MPAA) £10,000: triggered when you flexibly access defined-contribution pension (UFPLS or flexi-access drawdown beyond 25% PCLS). Replaces standard AA for future DC contributions.
Carry-forward unused allowance
Unused Annual Allowance from previous 3 tax years can be carried forward (Section 228A FA 2004). Must use current year AA fully first. Cannot carry-forward MPAA.
Worked example - high earner catching up:
| Tax year | AA | Used | Unused |
|---|---|---|---|
| 2023/24 | £60,000 | £20,000 | £40,000 |
| 2024/25 | £60,000 | £30,000 | £30,000 |
| 2025/26 | £60,000 | £40,000 | £20,000 |
| 2026/27 | £60,000 | £60,000 | £0 |
| Carry-forward available | £90,000 | ||
| Max 2026/27 contribution | £150,000 |
Salary required as employee/director to make this contribution: must have “relevant earnings” of at least £150,000 in the year (employer contributions count toward AA but don’t require earnings cover).
Lifetime Allowance abolition + Lump Sum Allowances
Lifetime Allowance (LTA) abolished from 6 April 2024 (Finance Act 2024 s.14, “Provision in connection with abolition of the lifetime allowance charge”, and Schedule 9). No total pot cap any more.
Replaced by two limits on TAX-FREE benefits:
Lump Sum Allowance (LSA) £268,275: the most you can take tax-free in your lifetime from a pension commencement lump sum (usually 25%), the tax-free part of an uncrystallised funds pension lump sum, and a standalone lump sum.
Lump Sum and Death Benefit Allowance (LSDBA) £1,073,100: a wider cap. Per gov.uk, “any lump sum that counts towards your lump sum allowance will also count towards your lump sum and death benefit allowance”, as do serious ill-health lump sums and certain lump sum death benefits paid to your beneficiaries. Lump sums above an allowance are taxed as income.
The LSA (£268,275) and LSDBA (£1,073,100) have applied since 6 April 2024, when they replaced the Lifetime Allowance, and are unchanged for 2026/27 with no increase announced.
Salary sacrifice vs RAS vs Net Pay
Salary sacrifice - contractually agree to reduce gross salary in exchange for employer pension contribution. Saves employee NI (8%/2%) + employer NI (15%) - some employers share the 15% saving with the employee. Reduces gross salary for ALL purposes (mortgage applications, AE contributions, SMP calc) - watch interaction.
NI cap from April 2029: “From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from NICs”, with employee and employer NI due on the excess (HMRC policy paper, 26 November 2025; enabling legislation: the National Insurance Contributions (Employer Pensions Contributions) Act 2026). Employer pension contributions that are not sacrificed salary stay free of NI. The Income Tax relief is unaffected.
Relief at Source (RAS) - employee contributes from net pay; provider claims 20% basic-rate relief from HMRC and adds to pot. Higher + additional rate must be claimed from HMRC, on a Self Assessment return or through HMRC if you do not file one. RAS is the method for personal pensions and SIPPs, and some workplace schemes use it.
Net Pay - employer deducts contribution from gross pay BEFORE Income Tax (full marginal-rate IT relief automatic) but AFTER NI (no NI saving). Common in larger employer schemes. NPS contributions are Net Pay.
Net Pay and low earners: someone whose taxable income is below the Personal Allowance pays no Income Tax, so a net pay arrangement has no tax to relieve, while relief at source would have added 20%. Since 6 April 2024 HMRC makes up the difference: savers in net pay arrangements “whose total taxable income is below the personal allowance” are paid a top-up at the basic rate “as soon as reasonably practicable after the tax year”, starting with 2024/25 contributions (FA 2004 s.193A, “Net pay arrangements: disparity with relief at source”; announced in the Autumn Budget 2021, per HMRC’s policy paper). There is no lower earnings floor, and the top-up is paid to you rather than into the pension.
Director-shareholder pension strategy
For limited company directors, EMPLOYER pension contributions are exceptionally efficient:
- Deductible as business expense - reduces Corporation Tax (25% main / 19% small profits)
- No personal Income Tax on contribution into pension
- No NI either direction (no employee NI, no employer NI)
- Counts toward AA + LSA / LSDBA
A £60,000 employer pension contribution saves £15,000 Corporation Tax at the 25% main rate + £0 personal tax = effective cost £45,000 for £60,000 in pension. It still uses £60,000 of the director’s Annual Allowance: employer contributions count in full, as above.
Watch: employer contribution must be “wholly and exclusively” for trade purposes (section 54 Corporation Tax Act 2009; HMRC BIM46035). HMRC looks at the whole remuneration package (salary, benefits and pension, not dividends) and accepts the deduction where it is comparable with what unconnected employees doing work of similar value are paid.
When to use this calculator
Use this calculator to:
- See the salary-sacrifice cost at your own salary. For RAS or Net Pay, use the per-£100 table above or the salary sacrifice vs relief at source comparison.
- Test a contribution amount - see how the net cost changes as you raise the percentage, up to your Annual Allowance.
- Plan around the £100k taper - if you’re between £100,000 and £125,140, every £1 into pension saves 60p of Income Tax. Bringing adjusted net income to £100,000 or below also restores Tax-Free Childcare (TFC) eligibility (gov.uk: Tax-Free Childcare). The High Income Child Benefit Charge (HICBC) is a separate test on adjusted net income between £60,000 and £80,000 (gov.uk: High Income Child Benefit Charge).
- Year-end top-up planning - identify contribution needed before 5 April to use this year’s AA fully.
Related calculators and guides
- Maximum pension contribution calculator - optimise full AA usage including carry-forward
- Salary sacrifice pension 2026/27 guide - comprehensive mechanism breakdown
- Pension 25% tax-free lump sum 2026/27 - PCLS + LSA + LSDBA mechanics
- Auto-enrolment deep-dive 2026/27 - workplace pension AE rules
- Pension comparison guide - Self-Invested Personal Pension (SIPP) vs SSAS vs workplace
- Pension tax relief guide - all three relief mechanisms
- 100k tax trap explainer - using pension to escape the 60% effective marginal rate band
- Class 2 + Class 4 NI for self-employed - pension relief differs for self-employed
- Director loan account guide - employer pension vs other extraction methods
Sources
Statutory basis, headings read on legislation.gov.uk on 30 September 2026:
- Finance Act 2004 s.192 (Relief at source), s.193 (Relief under net pay arrangements), s.193A (Net pay arrangements: disparity with relief at source), s.228 (Annual allowance), s.228ZA (Tapered reduction of annual allowance: high-income individual), s.228A (Carry forward of unused annual allowance) and Schedule 29 Part 1 (Lump sum rule, including the pension commencement lump sum).
- Finance (No. 2) Act 2023 s.20 (Annual allowance increased, to £60,000).
- Finance Act 2024 s.14 and Schedule 9 (abolition of the lifetime allowance).
- Income Tax Act 2007 s.35 (Personal allowance taper).
- HMRC policy paper: Pensions relief relating to net pay arrangements.
- HMRC policy paper: Changes to salary sacrifice for pensions from April 2029.
- gov.uk: Work out your tapered annual allowance and Lump sum allowance.
Browse pension contribution by salary
Pre-calculated pension contribution costs at 5 salary levels in 2026/27: the net cost of a 5% salary-sacrifice contribution after Income Tax and NI relief.
Next steps
Working out the tax is one half of the decision. These cover the other half.
Worked examples
Related calculators
Other UK tax calculators that pair with the Pension.
Frequently asked questions
How much tax relief do I get on pension contributions?
Income Tax relief at your top rate - 20%, 40% or 45% outside Scotland - whether your scheme uses relief at source or a net pay arrangement. Salary sacrifice also saves employee National Insurance, so a basic-rate taxpayer saves 28% (20% + 8% NI) and a higher-rate taxpayer above the Upper Earnings Limit saves 42% (40% + 2% NI). This calculator models salary sacrifice.
Is salary sacrifice better than relief-at-source?
Usually, by the employee National Insurance it saves - 8% of the contribution in the main NI band, 2% above the Upper Earnings Limit. Your employer also saves its own 15% NI, and some employers pay part of that into your pension. Relief at source gives Income Tax relief only: the provider adds 20% and you claim any higher-rate relief from HMRC. From April 2029 only the first £2,000 a year of pension contributions made by salary sacrifice will be free of NI.
What is the annual pension allowance?
£60,000 per tax year for 2026/27 (raised from £40,000 in April 2023). It tapers by £1 for every £2 of adjusted income over £260,000, down to £10,000, but only if your threshold income is also over £200,000. Pension savings above your allowance, after any unused allowance carried forward, trigger the annual allowance charge.
Can I claim higher-rate relief if my employer only does basic-rate?
Yes - if your scheme uses relief at source and you pay tax above the basic rate, you claim the extra relief yourself, on your Self Assessment return or through HMRC if you do not file one. Salary sacrifice and net pay arrangements give the full Income Tax relief automatically through payroll.
Does this include employer contributions?
No - we model only your personal contribution. Employer contributions go on top and aren't treated as your income.