Salary sacrifice on GBP 45,000

## Scenario

An employee earns £45,000 and sacrifices £5,000 into their workplace pension. Their contractual gross pay drops to £40,000. The entire sacrifice sits within the basic-rate band, so the tax and NI savings apply at the standard rates — but the amounts are larger because the sacrifice itself is larger. For Plan 2 student loan holders, the sacrifice also cuts a meaningful chunk off annual loan repayments.

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 | £45,000 | £40,000 | | Taxable pay (gross minus £12,570) | £32,430 | £27,430 | | Income tax (20%) | £6,486 | £5,486 | | Employee NI (8%) | £2,594 | £2,194 | | Take-home pay (no student loan) | £35,920 | £32,320 | | Pension contribution | £0 | £5,000 |

What the sacrifice actually costs (no student loan)

| | Amount | |---|---| | Take-home reduction | £3,600 | | Pension gained | £5,000 | | Tax saved | £1,000 | | NI saved | £400 | | Total relief | £1,400 | | Effective discount | 28% |

Detailed deduction working

Before sacrifice: - Taxable pay: £45,000 − £12,570 = £32,430 - Income tax: £32,430 × 20% = £6,486 - NI: (£45,000 − £12,570) × 8% = £32,430 × 8% = £2,594 - Take-home: £45,000 − £6,486 − £2,594 = £35,920

After sacrifice (gross £40,000): - Taxable pay: £40,000 − £12,570 = £27,430 - Income tax: £27,430 × 20% = £5,486 - NI: (£40,000 − £12,570) × 8% = £27,430 × 8% = £2,194 - Take-home: £40,000 − £5,486 − £2,194 = £32,320

Student loan interaction (Plan 2)

| | Before sacrifice | After sacrifice | |---|---|---| | Gross pay | £45,000 | £40,000 | | Amount above £27,295 | £17,705 | £12,705 | | Plan 2 repayment (9%) | £1,593 | £1,143 | | Student loan saving | — | £450 |

With the student loan saving included:

| | Amount | |---|---| | Take-home reduction (tax + NI) | £3,600 | | Student loan saving | £450 | | Actual net cost | £3,150 | | Pension gained | £5,000 | | Effective discount (with loan saving) | 37% |

A Plan 2 borrower at £45,000 sacrificing £5,000 receives £5,000 in pension while their combined deductions fall by £1,850 in total.

What to notice

• At £45,000 the full £5,000 sacrifice falls within the basic-rate band. The higher-rate threshold is £50,270, so there is no rate-band advantage yet — the discount is a consistent 28% for basic-rate payers.
• Monthly take-home reduction without loan saving: £300. With Plan 2 saving: £262.50. The monthly difference is tangible over a full year.
• The NI saving of £400 alone covers a meaningful portion of the sacrifice — it is real money, not just a paper adjustment.
• If your employer operates a salary sacrifice scheme where they pass on their own NI saving (13.8% of the sacrificed slice = £690 here), that saving can be contributed into your pension on top of your sacrifice. Ask your employer whether they do this.
• Sacrificing from £45,000 to £40,000 keeps gross pay well clear of any personal allowance tapering and stays below the higher-rate threshold, so there are no rate-band complications to manage.

Best next step

Use the salary sacrifice calculator to model your own sacrifice amount and see the monthly cash flow impact. If you hold a student loan, make sure you select the correct plan to see the full saving. For the wider mechanics, read How salary sacrifice changes net pay and pension value.