Pension and Take-Home Pay
The way your pension is paid changes what it costs you. Compare net pay, salary sacrifice and relief at source at common salaries in 2026/27.
Three ways pension contributions work
Net pay arrangement
The contribution is taken before Income Tax, so you get relief at your top rate immediately. National Insurance is still charged on your full pay.
Salary sacrifice
You give up part of your salary and your employer pays it into the pension. You save Income Tax and employee National Insurance.
Relief at source
You pay from take-home pay and the provider adds 20% basic-rate relief. Higher-rate relief is claimed separately. National Insurance is not reduced.
What each method costs your take-home pay
Yearly fall in take-home pay for a percentage of salary. “Into pension” shows what reaches the pot under net pay, salary sacrifice and relief at source in that order.
| Salary and contribution | Into pension (net pay / sacrifice / relief at source) | Take-home falls by: net pay | Salary sacrifice | Relief at source |
|---|---|---|---|---|
| £30,000 at 5% | £1,500 / £1,500 / £1,875 | £1,200 | £1,080 | £1,500 |
| £30,000 at 10% | £3,000 / £3,000 / £3,750 | £2,400 | £2,160 | £3,000 |
| £50,000 at 5% | £2,500 / £2,500 / £3,125 | £2,000 | £1,800 | £2,500 |
| £50,000 at 10% | £5,000 / £5,000 / £6,250 | £4,000 | £3,600 | £5,000 |
| £60,000 at 5% | £3,000 / £3,000 / £3,750 | £1,800 | £1,740 | £2,250 |
| £60,000 at 10% | £6,000 / £6,000 / £7,500 | £3,600 | £3,480 | £4,500 |
| £100,000 at 5% | £5,000 / £5,000 / £6,250 | £3,000 | £2,900 | £3,750 |
| £100,000 at 10% | £10,000 / £10,000 / £12,500 | £6,000 | £5,800 | £7,500 |
Reading the table. A contribution of the same size costs least under salary sacrifice, because it also avoids employee National Insurance. Under relief at source the pot receives more because the provider adds tax relief, but your own payment is also larger.
Pension and the £100,000 allowance taper
Between £100,000 and £125,140 the effective rate on extra pay is about 62%. A pension contribution reduces the income the taper is based on. At £110,000, sacrificing £10,000 into a pension lowers take-home by £3,800 even though £10,000 goes into the pot. The same effect can help you stay under the £100,000 limit for Tax-Free Childcare and free childcare hours.
Frequently asked questions
What is the difference between net pay, salary sacrifice and relief at source?
With a net pay arrangement your contribution comes out before tax, so you get tax relief at once but still pay National Insurance. With salary sacrifice you give up part of your salary, so you save tax and employee National Insurance. With relief at source you pay from take-home pay and the pension provider adds basic-rate tax relief.
Does salary sacrifice have downsides?
It lowers your contractual salary, which can affect things worked out from pay, such as some mortgage or statutory payments, and your pay must stay above the National Minimum Wage after the sacrifice. Check with your employer before you agree.
How do higher-rate taxpayers get their extra relief?
Under net pay and salary sacrifice it happens automatically. Under relief at source the provider adds 20% and you claim the extra 20% (or 25%) through Self Assessment or by contacting HMRC.
Can a pension contribution help if I earn over £100,000?
Yes. Contributions reduce adjusted net income, which can bring back some of the Personal Allowance you lose above £100,000. At £110,000, sacrificing £10,000 into a pension cuts your take-home by only £3,800.
Is there a limit to how much I can pay into a pension?
Yes. The annual allowance is £60,000 for most people and it can be reduced for very high earners. Tax relief is also limited to 100% of your UK earnings in the year. Check GOV.UK for the current rules.
Are these figures exact?
They are estimates using the 2026/27 rates, code 1257L and annual pay. Your employer’s scheme, tax code and pay dates can change the real figures. See our methodology.
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Disclaimer: This calculator gives estimates for general planning. Your real deductions depend on your tax code, pay period, employer pension scheme, benefits in kind (P11D) and student loan timing. See our methodology.