How the planner works
Everything runs in your browser using the published 2026/27 rates. This page explains each rule the planner applies, so you can check the working.
The three ways of paying into a workplace pension
The same £100 into your pension can cost you £58, £60 or £80 of take-home depending on the mechanism your employer uses. Most people never find out which one they are on.
Salary sacrifice (salary exchange, SMART)
You agree to a lower salary and your employer pays the difference into your pension as an employer contribution. Because the sacrificed pay never exists, you pay no income tax and no National Insurance on it, and your employer saves employer NI at 15%. Some employers add some or all of their saving to your pension; most keep it. The downsides: your contractual pay is lower, which can reduce mortgage borrowing, statutory maternity and sick pay, redundancy pay and death-in-service cover, and sacrifice cannot take you below the National Minimum Wage (£12.71 an hour for over-21s from April 2026).
Net pay arrangement
Payroll deducts the contribution before working out income tax, so you get full tax relief at your highest rate automatically. National Insurance is still charged on the whole salary. Most occupational and trust-based schemes work this way.
Relief at source
The contribution is taken from your pay after tax. You pay 80% and the provider claims the other 20% from HMRC, whatever rate of tax you pay (Scottish starter-rate taxpayers keep the extra 1%). If you pay tax above the basic rate you must claim the difference yourself through Self Assessment or a tax code adjustment. NEST, personal pensions and SIPPs use this method. The planner gives you credit for the claim, and tells you how much to claim.
Income tax
The personal allowance is £12,570. Under PAYE, code 1257L actually gives £12,579 of tax-free pay, which is why the planner (and your payslip) differ by a few pounds from a textbook calculation. Above £100,000 of adjusted net income the allowance is withdrawn at £1 for every £2, reaching zero at £125,140.
| England, Wales and Northern Ireland | Taxable income | Rate |
|---|---|---|
| Basic rate | up to £37,700 | 20% |
| Higher rate | £37,701 to £125,140 | 40% |
| Additional rate | over £125,140 | 45% |
| Scotland | Taxable income | Rate |
|---|---|---|
| Starter rate | up to £3,967 | 19% |
| Basic rate | £3,968 to £16,956 | 20% |
| Intermediate rate | £16,957 to £31,092 | 21% |
| Higher rate | £31,093 to £62,430 | 42% |
| Advanced rate | £62,431 to £125,140 | 45% |
| Top rate | over £125,140 | 48% |
Taxable income means income after the personal allowance. Welsh rates are the same as England's.
National Insurance
Employees pay 8% on earnings between £12,570 and £50,270 and 2% above that. Employers pay 15% on everything above £5,000. Nobody pays employee NI after State Pension age. Salary sacrifice reduces the earnings both rates apply to.
The 60% tax trap
Between £100,000 and £125,140 each extra £100 is taxed at 40% and also removes £50 of allowance, which is then taxed at 40%: £60 of tax on £100 of pay, plus 2% National Insurance. Scottish taxpayers in the same zone pay 45% plus 22.5%, about 69.5%. Getting adjusted net income down to £100,000 through pension contributions is the most common reason people use this planner. The chart on the planner page shows the zone.
Child Benefit and the High Income Child Benefit Charge
Child Benefit is £27.05 a week for the eldest child and £17.90 for each other child. If the higher earner in the household has adjusted net income above £60,000, a tax charge claws back 1% of the benefit for every £200 over, so it is all gone at £80,000. Pension contributions reduce adjusted net income and therefore the charge.
Tax-Free Childcare and the 30 funded hours
Both stop if either parent's adjusted net income is over £100,000. Unlike the taper and the Child Benefit charge this is a cliff edge: £1 over the limit loses the whole entitlement, which is worth up to £2,000 a child a year in Tax-Free Childcare plus the funded hours. The planner flags it and works out the sacrifice needed to stay under.
The £2,000 salary sacrifice cap from April 2029
Announced in the Autumn Budget on 26 November 2025: from 6 April 2029, salary-sacrificed pension contributions above £2,000 a year will be charged to employee and employer National Insurance. The first £2,000 keeps its NI advantage and income tax relief is untouched. The planner shows what the change would cost you today so you can plan for it.
Student loans
Repayments are 9% of earnings above the plan threshold (Plan 1 £26,900, Plan 2 £29,385, Plan 4 £33,795, Plan 5 £25,000) and 6% above £21,000 for postgraduate loans. Payroll bases them on the same earnings as National Insurance, so salary sacrifice reduces them but net pay and relief-at-source contributions do not, and each month's deduction is rounded down to the whole pound.
What the planner does not do
- Bonuses, benefits in kind, company cars, other jobs, rental or investment income.
- Marriage Allowance, Blind Person's Allowance, Gift Aid, tax codes other than 1257L.
- The tapered pension annual allowance for people with adjusted income over £260,000, and carry-forward.
- Universal Credit and other means-tested benefits.
- Period-by-period payroll rounding and directors' annual NI calculations.
Questions people ask
Which pension method am I on?
Look at a payslip. If your gross pay is lower than your contractual salary and the pension line is missing or shows as an employer contribution, it is salary sacrifice (sometimes called salary exchange or SMART). If a pension deduction appears before tax is worked out, it is a net pay arrangement. If the deduction is taken from your pay after tax and your provider adds 25% to it, it is relief at source; NEST and most personal pensions and SIPPs work this way.
Why does salary sacrifice give a higher take-home than the other two methods?
Because the sacrificed pay never exists for National Insurance purposes. You save employee NI at 8% (or 2% above £50,270) on the amount, and your employer saves 15%. The other two methods only give income tax relief.
What is the 60% tax trap?
Between £100,000 and £125,140 of adjusted net income you lose £1 of personal allowance for every £2 you earn. Each extra £100 is taxed at 40% and also drags £50 more into tax at 40%, so the effective rate is 60% plus 2% National Insurance. In Scotland the equivalent zone is taxed at about 69.5%. Pension contributions reduce adjusted net income, so many people in this zone sacrifice down to £100,000.
What is adjusted net income?
Your total taxable income minus gross pension contributions that were paid from taxed income (relief at source) and gross Gift Aid donations. Salary sacrifice and net pay contributions reduce it automatically because they never form part of your taxable pay. HMRC uses it for the personal allowance taper, the High Income Child Benefit Charge and the childcare income limit.
What is the £2,000 salary sacrifice cap?
The Autumn Budget in November 2025 announced that from 6 April 2029, salary-sacrificed pension contributions above £2,000 a year will be charged to employee and employer National Insurance. The first £2,000 keeps the NI saving, and income tax relief is unchanged. The planner can apply it to your figures so you can see the effect in advance.
Is the relief-at-source higher rate relief included in my take-home?
Yes. The planner extends your basic rate band by the gross contribution, which is what HMRC does once you claim. The extra relief does not appear on your payslip: you must claim it through Self Assessment or by asking HMRC to change your tax code. The amount to claim is shown in the breakdown.
Why is my payslip a few pounds different?
Payroll calculates tax and National Insurance for each pay period using tables and rounding rules, and your tax code may not be 1257L. The planner works on an annual basis with the standard code, which is accurate to within a few pounds for someone paid the same amount each month.
This is general information, not advice. Pension and tax decisions depend on your circumstances; for anything significant, speak to your payroll team, HMRC or a regulated financial adviser.