Restrictions Coming on Salary Sacrifice Regime

What has been announced?
In his Autumn Statement, the Chancellor said that the majority of employees were taxed on a cash salary, but that some who sacrificed part of their salary for benefits in kind paid less tax and national insurance, and the Treasury wanted to reduce the difference between the two.

This means that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax net salary.

Further detail
Before panic sets in, general arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.

The original HMRC consultation closed on 19 October 2016. This stated certain benefits would be unaffected by the proposals as the government ‘wishes to encourage employers to provide these to employees’. These were:

  • employer pension contributions
  • employer-provided pension advice
  • employer-supported childcare and provision of workplace nurseries
  • cycles and cyclists' safety equipment provided under the cycle to work scheme

However, HMRC has now confirmed that the new rules will also not apply to salary sacrifice for low emission cars, defined as those with CO2 emissions of up to 75g/km.

What other benefits are likely to be affected?

Apart from the above details, the announcement did not give a clear list of all benefits which were affected. However, in the consultation there were references to other payments such as:

  • medical insurance
  • workplace car parking
  • mobile phone contracts

Source ACCA

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