Keeping more
What does a bonus actually cost you?
Every salary sacrifice calculator online assumes a flat salary. If you are paid on commission or a bonus, the question is different: a single large payment can push you into a band where you keep 38p of every pound, and back out of it again above £125,140.
Your bonus is landing in the 60% band
Between £100,000 and £125,140 the personal allowance is withdrawn at £1 for every £2 you earn. With National Insurance on top you are keeping about 38p of every extra pound. Above £125,140 it improves again, which is the strange part.
Take it all as cash
£72,356
take-home for the year
Sacrifice 100%
£59,856
plus £28,750 into the pension
What each pound in the pension costs you
43p
You give up £12,500 of take-home and £28,750 lands in the pension. That includes £3,750 of employer National Insurance they no longer pay.
This is arithmetic, not advice. It does not model the annual allowance, the tapered allowance for high earners, carry-forward, or the fact that pension money is locked away for decades and taxed when it comes out. Sacrificing below minimum wage is not permitted, and salary sacrifice can affect mortgage applications, statutory pay and some benefits. Talk to somebody qualified before you sign anything.
The band that makes no sense
Above £100,000 the UK withdraws your personal allowance at £1 for every £2 you earn. You are paying 40% tax and simultaneously losing tax-free income you used to have.
The result is about 62% once National Insurance is counted, and it runs all the way to £125,140. Then the allowance is gone. There is nothing left to take away, and the rate falls back to 47%.
So a £110,000 earner keeps less of their next pound than a £150,000 earner does. That is not a policy anybody designed on purpose. It is what happens when two rules meet.
Why this matters more if you are paid on commission
Somebody on a flat £95,000 salary never enters the band. Somebody on an £85,000 base with a good year on commission lands in the middle of it. Most of them find out when the payslip arrives.
That is the whole reason this page exists. The eight calculators ranking for salary sacrifice are built for the first person. Nobody built one for the second.
Three things to check before bonus season
- The deadline. The election normally has to be made before you are entitled to the bonus, not after it is announced. Missing that date is the most common way people lose this entirely.
- Whether they pass on the employer saving. They stop paying 15% National Insurance on whatever you sacrifice. Some pass all of it on, some keep it. On £20,000 that is £3,000 and it is worth one email.
- Your annual allowance. There is a cap on what can go into a pension each year, and it tapers for high earners. This calculator does not model it.
The honest caveats
Pension money is locked away until at least 55, going to 57. It is taxed when you take it out. A lower recorded salary can affect a mortgage application, statutory pay and some benefits.
None of that makes the arithmetic wrong. It makes it one input rather than the answer. This page is education, not advice. Pensions are the subject where that distinction earns its keep.
Questions people actually ask
Can you salary sacrifice a bonus?
In the UK, usually yes, but the election normally has to be made before you become entitled to the bonus rather than after it is announced. That timing is the single most common reason people miss it, so ask your payroll team what their deadline is well before bonus season.
Why is the marginal rate 60% between £100,000 and £125,140?
The personal allowance is withdrawn at £1 for every £2 earned above £100,000. So on top of 40% income tax you lose the tax-free effect of allowance you no longer have, which works out at an effective 60%, or about 62% once National Insurance is counted. Above £125,140 the allowance is gone and the rate drops back.
Does my employer have to pass on their National Insurance saving?
No. When you sacrifice, your employer stops paying 15% National Insurance on that amount. Some pass all of it into your pension, some pass part and some keep it. It is worth asking directly, because on a £20,000 sacrifice it is £3,000.
Is sacrificing a bonus always a good idea?
No. The money is locked away until at least 55, rising to 57, and it is taxed when you draw it. It can also affect mortgage applications and statutory pay because your recorded salary is lower. The arithmetic is only one input into that decision.
The gap between what you cost and what you keep
There is a number attached to your job that is bigger than your salary. Most people never look at it once.
Read The £42,000 You Never See
Who wrote this
Fifteen years in sales, starting at €700 a month. Ranked first of more than 250 account executives globally at Deel in the first half of 2023. Everything you can check is on the proof page, including the parts that cannot be checked.
This is education, not advice, and I am not a licensed adviser. What that means in full is in what this is and what it is not.