Example
Salary sacrifice on £30,000
A worked example showing why a £30,000 salary sacrifice decision needs to be judged on net pay change, not gross sacrifice alone.
## Scenario
An employee earns £30,000 and sacrifices £2,000 a year into their workplace pension. Their contractual gross pay drops to £28,000. Because salary sacrifice reduces the pay figure before both income tax and National Insurance are calculated, the employee saves on both — making the real out-of-pocket cost of that £2,000 pension contribution noticeably less than £2,000.
At £30,000 the salary also sits just above the Plan 2 student loan repayment threshold (£27,295), which adds a further saving that most people miss.
All figures use 2025-26 rates: personal allowance £12,570, basic-rate income tax 20%, employee NI 8% between £12,570 and £50,270, Plan 2 student loan 9% above £27,295.
Before and after comparison
| | Before sacrifice | After sacrifice | |---|---|---| | Gross pay | £30,000 | £28,000 | | Taxable pay (gross minus £12,570) | £17,430 | £15,430 | | Income tax (20%) | £3,486 | £3,086 | | Employee NI (8%) | £1,394 | £1,234 | | Take-home pay (no student loan) | £25,120 | £23,680 | | Pension contribution | £0 | £2,000 |
What the sacrifice actually costs (no student loan)
| | Amount | |---|---| | Take-home reduction | £1,440 | | Pension gained | £2,000 | | Tax saved | £400 | | NI saved | £160 | | Total relief | £560 | | Effective discount | 28% |
Detailed deduction working
Before sacrifice: - Taxable pay: £30,000 − £12,570 = £17,430 - Income tax: £17,430 × 20% = £3,486 - NI: (£30,000 − £12,570) × 8% = £17,430 × 8% = £1,394 - Take-home: £30,000 − £3,486 − £1,394 = £25,120
After sacrifice (gross £28,000): - Taxable pay: £28,000 − £12,570 = £15,430 - Income tax: £15,430 × 20% = £3,086 - NI: (£28,000 − £12,570) × 8% = £15,430 × 8% = £1,234 - Take-home: £28,000 − £3,086 − £1,234 = £23,680
Student loan interaction (Plan 2)
Plan 2 repayments are charged at 9% on earnings above £27,295. The sacrifice moves gross pay from £30,000 to £28,000, which changes the repayment calculation.
| | Before sacrifice | After sacrifice | |---|---|---| | Gross pay | £30,000 | £28,000 | | Amount above £27,295 | £2,705 | £705 | | Plan 2 repayment (9%) | £243 | £63 | | Student loan saving | — | £180 |
With the student loan saving included, the net cost of the £2,000 sacrifice falls further:
| | Amount | |---|---| | Take-home reduction (tax + NI) | £1,440 | | Student loan saving | £180 | | Actual net cost | £1,260 | | Pension gained | £2,000 | | Effective discount (with loan saving) | 37% |
For a Plan 2 borrower at this salary, every £1 sacrificed costs only 63p in reduced take-home.
What to notice
- Even without a student loan, the 28% discount applies: £1,440 net cost for £2,000 in pension.
- The Plan 2 saving is substantial here because the salary sits only £2,705 above the threshold. A £2,000 sacrifice cuts that exposed amount by 74%, almost eliminating the repayment entirely.
- If you are on Plan 1 (threshold £24,990) instead, the student loan is unaffected by this sacrifice because both gross figures remain above the Plan 1 threshold. The saving is £0 rather than £180.
- Monthly take-home reduction without loan saving: £120. With the loan saving: £105. The loan saving is real cash each month.
Best next step
Use the salary sacrifice calculator to enter your exact contribution and see whether you hold a student loan. Then read Student loans and take-home pay to understand which plan applies to your loan and how the thresholds interact with sacrifice decisions.
How to use PayPath here
Run the relevant calculator for your live numbers, review the methodology if the assumptions matter to your decision, and save the strongest scenarios in the workspace if you are comparing more than one option.