How much tax relief do I get on pension contributions?

Relief is given at the rate of income tax the contribution would otherwise have carried. In 2026/27 in England, Wales and Northern Ireland that is 20% on pay up to £50,270 and 40% above it. A 5% contribution on £40,000 puts £2,000 in the pension and takes £1,600 off take-home pay under net pay or relief at source, and £1,440 under salary sacrifice.

What is the difference between relief at source and net pay?

With net pay the employer takes the contribution from pay before income tax, so relief is given in full through the payslip. With relief at source the contribution comes from pay after tax, and the provider claims 20% from HMRC and adds it to the pot; a taxpayer above the basic rate claims the rest from HMRC. For someone who pays tax the cost is the same. For someone earning below the £12,570 personal allowance, relief at source still adds 20%, where net pay gives nothing through the payslip.

How does salary sacrifice save National Insurance?

Under salary sacrifice the salary itself is reduced and the employer pays the contribution, so National Insurance is worked out on the lower salary. That saves 8% of the contribution on pay up to £50,270 and 2% above it, on top of the income tax relief. Anything else worked out from salary, such as statutory pay, uses the lower figure too.

Do pension contributions reduce student loan repayments?

Only under salary sacrifice. Repayments are 9% of pay above the plan threshold (6% for a postgraduate loan), and salary sacrifice lowers the pay they are worked out on. Net pay and relief at source contributions leave repayments unchanged. Choose a plan in the form to see the difference.

Do pension contributions restore the personal allowance above £100,000?

Yes. The allowance is reduced by reference to adjusted net income, which is income less pension contributions. A contribution that brings adjusted net income back to £100,000 restores the full £12,570 allowance, under any of the three arrangements. The tax saved line shows the effect.

Calculators

Pension contribution calculator

Tax year 2026/27, for England and Northern Ireland, Scotland, Wales. Shows the same contribution under relief at source, net pay and salary sacrifice: the cost to take-home pay, the income tax saved and the National Insurance saved.

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Going into your pension

£2,000a year

Cost with relief at source: £1,600
Cost with net pay: £1,600
Cost with salary sacrifice: £1,440

£2,000.00 in the pension costs between £1,440.00 (salary sacrifice) and £1,600.00 (relief at source) of take-home pay. Which arrangement applies is set by the pension scheme and the employer.

Under 2027/28 as announced so far, the same contribution costs the same under each arrangement.

The working

What a 5% pension contribution on £40,000 costs in take-home pay in 2026/27, by arrangement
Line	Rate	On	A year	Source
			£40,000.00
With no pension contribution, take-home pay on £40,000.00 is £32,319.60 a year.
	5%	£40,000.00	£2,000.00
£40,000.00 × 5% = £2,000.00 a year under each arrangement, before anything an employer adds.
	20%	£2,000.00	£400.00	gov.uk
You pay £1,600.00 from pay after tax and the provider claims £400.00 of basic rate relief. Tax saved in total: £400.00. Checked 7 November 2026, in force.
	0%	£2,000.00	£0.00	gov.uk
National Insurance is still worked out on the full £40,000.00, so nothing is saved. Checked 9 November 2026, in force.
	80%	£2,000.00	−£1,600.00
Take-home pay of £32,319.60 becomes £30,719.60: £1,600.00 less a year, £133.33 a month, for £2,000.00 in the pension.
	20%	£2,000.00	£400.00	gov.uk
The contribution comes out of pay before income tax, so tax is worked out on £38,000.00. Income tax falls from £5,486.00 to £5,086.00, saving £400.00. Checked 7 November 2026, in force.
	0%	£2,000.00	£0.00	gov.uk
National Insurance is still worked out on the full £40,000.00, so nothing is saved. Checked 9 November 2026, in force.
	80%	£2,000.00	−£1,600.00
Take-home pay of £32,319.60 becomes £30,719.60: £1,600.00 less a year, £133.33 a month, for £2,000.00 in the pension.
	20%	£2,000.00	£400.00	gov.uk
Salary is reduced to £38,000.00 and the employer pays the £2,000.00 in. Income tax falls from £5,486.00 to £5,086.00, saving £400.00. Checked 7 November 2026, in force.
	8%	£2,000.00	£160.00	gov.uk
National Insurance is worked out on the reduced salary: it falls from £2,194.40 to £2,034.40, saving £160.00. Checked 9 November 2026, in force.
	72%	£2,000.00	−£1,440.00
Take-home pay of £32,319.60 becomes £30,879.60: £1,440.00 less a year, £120.00 a month, for £2,000.00 in the pension.

How this is calculated

No contribution. Take-home pay on the salary alone, as the starting point.
Relief at source. The contribution less 20% comes from pay after tax, and the provider adds the 20%. Any relief above the basic rate is shown by widening the basic rate band by the contribution.
Net pay. The contribution comes off pay before income tax. National Insurance and student loan repayments still use the full salary.
Salary sacrifice. The salary is reduced by the contribution before income tax, National Insurance and student loan repayments are worked out.
Side by side. For each: income tax saved, National Insurance saved, and the fall in take-home pay for the same amount in the pension.

The rounding conventions are listed in the methodology, and the formulas run from the open rules file for 2026/27.

Rules used

Tax year: 2026/27 (6 April 2026 to 5 April 2027)
Nation: England and Northern Ireland
Figures: Checked between 7 November 2026 and 9 November 2026. Status: in force.
Next scheduled change: 6 April 2027
Every figure: Rates and allowances for 2026/27, each with its source and the date it was checked.
Sources used: Income tax rates, checked 7 November 2026
National insurance rates letters, checked 9 November 2026

What changes on 6 April 2027

None of the figures this result uses changes on that date, as far as 2027/28 has been announced.

Not yet set for 2027/28: Scottish income tax bands and rates; Plan 1 threshold; Plan 4 threshold; Plan 5 threshold; Postgraduate loan threshold.

Switch the tax year in the form to see the result under 2027/28 as announced so far. The Budget 2026 page lists every measure, including those that do not touch this result.

What this does not do. It does not model employer contributions, the annual allowance or its taper, the money purchase annual allowance, tax relief limits for non-taxpayers under net pay, or changes to benefits based on salary. Which arrangement applies is set by the scheme and the employer. It never suggests how much to contribute.

Questions people ask

How much tax relief do I get on pension contributions?: Relief is given at the rate of income tax the contribution would otherwise have carried. In 2026/27 in England, Wales and Northern Ireland that is 20% on pay up to £50,270 and 40% above it. A 5% contribution on £40,000 puts £2,000 in the pension and takes £1,600 off take-home pay under net pay or relief at source, and £1,440 under salary sacrifice.
What is the difference between relief at source and net pay?: With net pay the employer takes the contribution from pay before income tax, so relief is given in full through the payslip. With relief at source the contribution comes from pay after tax, and the provider claims 20% from HMRC and adds it to the pot; a taxpayer above the basic rate claims the rest from HMRC. For someone who pays tax the cost is the same. For someone earning below the £12,570 personal allowance, relief at source still adds 20%, where net pay gives nothing through the payslip.
How does salary sacrifice save National Insurance?: Under salary sacrifice the salary itself is reduced and the employer pays the contribution, so National Insurance is worked out on the lower salary. That saves 8% of the contribution on pay up to £50,270 and 2% above it, on top of the income tax relief. Anything else worked out from salary, such as statutory pay, uses the lower figure too.
Do pension contributions reduce student loan repayments?: Only under salary sacrifice. Repayments are 9% of pay above the plan threshold (6% for a postgraduate loan), and salary sacrifice lowers the pay they are worked out on. Net pay and relief at source contributions leave repayments unchanged. Choose a plan in the form to see the difference.
Do pension contributions restore the personal allowance above £100,000?: Yes. The allowance is reduced by reference to adjusted net income, which is income less pension contributions. A contribution that brings adjusted net income back to £100,000 restores the full £12,570 allowance, under any of the three arrangements. The tax saved line shows the effect.

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