Calculate Pension Contributions UK 2026/27: Tax Relief + Net Cost
Calculate your UK pension contributions for 2026/27 - see how much tax relief you actually get and what £100 of pension costs you in take-home. Salary sacrifice vs relief-at-source comparison, all UK regions, £60,000 Annual Allowance check.
See also: Auto-Enrolment 2026/27, salary sacrifice guide, 25% PCLS lump sum, tax relief mechanics.
Take-home pay
£30,880
28.0% 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 | +£560 |
| Net cost to take-home | −£1,440 |
| Take-home after pension | £30,880 |
How UK pension contributions save you tax in 2026/27
UK pension contributions get tax relief at your MARGINAL income tax rate plus, with salary sacrifice, employee + employer National Insurance savings. 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 (£100k-£125k) | Salary sacrifice | £38 (60% IT + 2% NI) |
The “60% effective” rate applies in the £100k-£125k Personal Allowance taper zone - £2 of PA is lost for every £1 of income above £100k. Each £1 in this band costs 60p IT + NI = 38p net for £1 of pension. Most efficient contribution zone in the entire tax system.
Annual Allowance 2026/27
Standard Annual Allowance £60,000 (per Finance Act 2023, applies from 2023/24 onwards). Up from £40,000 pre-April 2023.
Tapered Annual Allowance: reduced by £1 for every £2 of “adjusted income” above £260,000. Minimum £10,000 floor for adjusted income above £360,000.
| Adjusted income | 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” = threshold income + pension input + employer contributions. “Threshold income” excludes pension contributions. Both tests must exceed limits for 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 2023 Section 18 + Schedule 9). No total pot cap any more.
Replaced by two limits on TAX-FREE benefits:
Lump Sum Allowance (LSA) £268,275: maximum tax-free PCLS (25% pension commencement lump sum) across all your pensions in your lifetime.
Lump Sum and Death Benefit Allowance (LSDBA) £1,073,100: maximum tax-free death benefit lump sums payable to beneficiaries on your death. Excess over LSDBA taxed at beneficiary’s marginal rate.
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%) - employer often shares the 15% saving with employee. Reduces gross salary for ALL purposes (mortgage applications, AE contributions, SMP calc) - watch interaction.
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 via Self Assessment (often missed - HMRC nudge letters now target this). RAS is the default for personal pensions, SIPPs, some workplace schemes.
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 penalty for low earners: workers below £12,570 PA get NO tax relief at all via Net Pay (no IT to relieve). Same worker in RAS would get 20% top-up automatically. From April 2026 the Government tops up the missing 20% for Net Pay workers earning between Lower Earnings Limit (LEL) and PA - new HMRC scheme launching April 2026.
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 (25%) + £0 personal tax = effective cost £45,000 for £60,000 in pension. Equivalent to 33% relief without using any AA from the personal salary side.
Watch: employer contribution must be “wholly and exclusively” for trade purposes (Section 54 ITTOIA 2005 + CTA 2009 Chapter 1) - excessive contributions for owner-directors get scrutinised. Reasonable rule of thumb: combined salary + dividend + employer pension shouldn’t exceed what an arm’s-length employer would pay for equivalent work.
When to use this calculator
Use this calculator to:
- Compare contribution methods - see net cost across salary sacrifice vs RAS vs Net Pay at your specific marginal rate.
- Test optimal contribution amount - many higher earners are sub-optimal; aim to use full AA each year for maximum tax shelter.
- Plan £100k cliff escape - if you’re £100k-£125k, every £ into pension recovers 60p of taxed income. Critical for High Income Child Benefit Charge (HICBC) + Tax-Free Childcare (TFC) + £100k taper sufferers.
- 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
Annual Allowance and Lifetime Allowance changes verified against Finance Act 2023 + Finance (No. 2) Act 2024. Statutory basis: Finance Act 2004 Sections 188-237 (registered pension scheme rules), Section 228 (Annual Allowance), Section 228A (carry-forward), Section 237B (LSA/LSDBA), Schedule 28 (PCLS conditions). Net Pay penalty top-up from April 2026 per Autumn Budget 2024 announcement.
Browse pension contribution by salary
Pre-calculated pension contribution costs at 14 salary levels in 2026/27. Salary sacrifice vs RAS net cost, employer match, AA usage per amount.
Next steps
Working out the tax is one half of the decision. These cover the other half.
Related calculators
Other UK tax calculators that pair with the Pension.
Frequently asked questions
How much tax relief do I get on pension contributions?
If you sacrifice salary into pension, you save both income tax and National Insurance at your marginal rate. A basic-rate taxpayer saves 28% (20% IT + 8% NI); a higher-rate taxpayer sacrificing above the UEL saves 42% (40% IT + 2% NI).
Is salary sacrifice better than relief-at-source?
Usually yes - salary sacrifice also saves the NI your employer would pay, which some schemes split back into your pension. Relief-at-source only gives income tax relief (not NI) without a claim via Self Assessment.
What is the annual pension allowance?
£60,000 per tax year for 2026/27 (raised from £40,000 in April 2023; unchanged since), tapered down to £10,000 for very high earners. Contributions above this lose tax relief.
Can I claim higher-rate relief if my employer only does basic-rate?
Yes - if your scheme uses relief-at-source and you pay higher-rate tax, you must claim the additional 20% or 25% through Self Assessment. Salary sacrifice gives you full relief automatically.
Does this include employer contributions?
No - we model only your personal contribution. Employer contributions go on top and aren't treated as your income.