Changes to salary sacrifice and the way it operates in the UK have been on the cards for some time, with a consultation beginning in August 2016. However, some sort of regulatory change has been inevitable for longer still, purely due to the way the industry has grown.
You can rest assured that we have been planning for these salary sacrifice changes, announced in Chancellor Philip Hammond's Autumn statement on 23 November 2016, and will be working to ensure smooth transitions between now and April 2017, when the new rules come into place.
As of April 2017, most salary sacrifice schemes will be subject to the same tax as cash income. There are a few very important exceptions, including:
These four areas, Hammond has already guaranteed, will still be exempt. However, many other benefits will no longer come with NI savings, even if employers choose to continue offering them to employees for the lifestyle and wellbeing support that they provide – which they will still be able to do.
James Malia, Director of Employee Benefits, Sodexo Benefits and Rewards Services, comments on Philip Hammond’s Autumn statement, with regards to the changes to salary sacrifice schemes:
The Government’s decision to remove the financial benefits of salary sacrifice schemes is not unexpected, and while disappointing for employers and employees, it will now bring clarity to both them and the providers after a period of unknown. The news that the exceptions now include ultra low emission cars is also a welcome decision from the Chancellor.
“The Chancellor has made it clear that schemes in place before April 2017 will have the tax exemptions protected. However, this protection for most schemes will end in April 2018, so whilst demand will no doubt be high, any implementation should be carefully considered to maximise the savings.
“The industry now needs to develop innovative ways for employers to deliver attractive and innovative benefits to their workforce through an alternative mechanism. Even without tax efficiencies, many of the benefits in question can still be of great value to employees, and this should not be overlooked. Providers must work with businesses to establish a sustainable method of funding these important schemes, which improve the day to day lives of employees.”
On November 23rd, 2016, Philip Hammond announced his first budget as Chancellor – and the first since the Brexit vote. With it came the announcement of changes to salary sacrifice rules...
As of April 2017, most salary sacrifice schemes will be subject to the same tax as cash income. Employers will still be able to offer these benefits but...