Three ways relief is given
| Method | Taken from | Tax relief | NI saving |
|---|---|---|---|
| Relief at source | Take-home pay (you pay 80%) | 20% added by provider, extra via tax return | No |
| Net pay arrangement | Gross pay, before tax | Automatic at your top rate | No |
| Salary sacrifice | Salary, before tax and NI | Automatic at your top rate | Yes (8% or 2%) |
The calculator compares your take-home pay with and without the contribution. The difference is what the pension really costs you.
Worked example: £6,000 into a pension on £60,000
Salary £60,000, £6,000 gross contribution, relief at source, England
You pay £4,800 from take-home pay, the provider adds £1,200, and because £6,000 extends your basic rate band, a further £1,200 of higher-rate relief comes back through your tax return or tax code. The real cost is £3,600 for £6,000 in your pension.
Cost to you£3,600for £6,000 in your pension
- Total tax relief
- £2,400
- Relief rate
- 40.0%
- Employer NI saved
- £0only with salary sacrifice
- Into your pension
- £6,000.00
- You pay from take-home pay (80%)
- £4,800.00
- Basic-rate relief claimed by provider
- £1,200.00
- Extra relief through Self Assessment / tax codehigher, additional or Scottish intermediate rate
- £1,200.00
- Net cost to you
- £3,600.00
Through salary sacrifice the same £6,000 costs £3,480, because you also save 2% NI on the sacrificed pay — and your employer saves 15%.
2026/27 limits
- Annual allowance: £60,000, including employer contributions.
- Tapered annual allowance: reduces for threshold income above £200,000 and adjusted income above £260,000, to a minimum of £10,000.
- Money purchase annual allowance: £10,000 once you have flexibly accessed a defined contribution pension.
- Carry forward: unused allowance from the previous three tax years can be used if you were a member of a scheme.
The November 2025 Budget announced that salary-sacrificed pension contributions above £2,000 a year will attract National Insurance from April 2029; until then the full NI saving applies.
Tips
- Claim higher-rate relief for the last four tax years if you never did — many people miss it.
- Low earners in net pay schemes below the personal allowance used to get no relief; HMRC now makes top-up payments.
- Check your employer’s match — extra employer contributions are the best “return” available.