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.

Pension Contribution on £120,000 UK Salary

At 5% salary sacrifice on £120,000, £6,000 goes into your pension but only costs £2,280 from your take-home — 62% of the contribution comes back as Income Tax and National Insurance relief. Under a net pay arrangement or relief at source only the Income Tax part applies.

Take-home pay

£73,877

33.4% effective tax rate

Monthly: £6,156
Weekly: £1,421
Daily: £284
Hourly: £37.89

Gross salary	£120,000
Going into pension	−£6,000
Tax + NI relief (salary sacrifice)	+£3,720
Net cost to take-home	−£2,280
Take-home after pension	£73,877

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.

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Your salary in context

ONS · HMRC · CPI

Gross going into pension

£6,000 is invested in your pension pot (before any employer match).
Net cost to you

Your take-home drops by only £2,280 a year — not the full £6,000 contribution.
Tax + NI relief

Salary sacrifice saves £3,720 in Income Tax and National Insurance — 62% of the contribution.
Take-home without vs with

Without pension: £76,157/year. With pension: £73,877/year.
Marginal rate

Income Tax on the top slice of your pay is 60%. That is above the 40% band rate because the Personal Allowance is withdrawn at £1 for every £2 of adjusted net income over £100,000. Contributions come off that top slice, so Income Tax relief starts at this rate.
Monthly take-home change

Monthly take-home falls from £6,346 to £6,156 — a £190 difference per month.

Nearby salaries

£80,000

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.