Salary sacrifice

Will your salary sacrifice arrangements will still work to save tax once the rules are changed in 2017?

Salary sacrifice is when employees receive benefits taken in place of salary. In many respects these benefits provide employees with higher take home value than if they were treated the same as cash income. The chancellor intends to limit salary sacrifice arrangements and the change is planned to add £1bn a year to tax revenues by 2020. So now is the time to review your arrangements to see if they will continue to be tax efficient.
No definitive list of benefits affected has been published, but benefits that may no longer be tax effective by salary sacrifice are:

• Mobile phones and tablets
• Car parking
• Gym membership, and possibly
• Health check-ups

We await the full details which were not published in the budget statement.
A number of benefits that will not be affected by these changes to the salary sacrifice arrangements:

• Pensions
• Child care
• Cycle to work schemes
• Ultra-low emission cars (CO2 emissions up to 75g/km)

Benefits in place before April 2017 will be protected from restrictions for 1 year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to 4 years.
Get prepared for the salary sacrifice changes
For those who contribute towards or make-good their benefits to reduce the taxable amounts, they will have until the 6 July after the tax year to do so – starting 6 July 2017. This only applies to benefits not already taxed as income through payroll.
Anyone concerned they will be affected by these changes should consider a review of their salary sacrifice/benefits arrangements prior to the April 2017 cut-off date. Please don’t hesitate to get in touch to discuss your situation further if you are unsure what to do.