Changes with Salary Sacrifice Schemes

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Bye Bye to Salary Sacrifice

The idea is simple – you give up part of your salary in return for a non-cash benefit – such as childcare vouchers or pay for the company car. Essentially you’re paid a lower salary which also means you pay less tax and NI. The original idea of salary sacrifice has diluted in the recent years, and employers have been offering gym memberships, mobile phone contracts and even white goods. The Chancellor announced that it’s time to ‘wield the axe’ on the tax the Treasury is missing out on.

Starting from April 2017, the tax exemption on UK salary sacrifice schemes will be removed, making it no different than buying on the open market for the employee. Philip Hammond noted that the system had become ‘unfair’ and that ’employees who use these schemes will pay the same as everyone else’. There will be a few exceptions to childcare, cycle-to-work schemes and pensions. Businesses are expected to cut their range of benefits on offer, while those currently still in contract have until April 2018 before the rules come into force, with company car schemes will run until April 2021.

Written by: Sophie Lee
Administration and Marketing Executive at Williams Kent

References: CIPD People Management Dec/Jan issue
January 23rd 2017

Tags: Employee Relations, HR, People Management, Salary Sacrifice Categories: Uncategorized