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Tax advantages of salary sacrifice schemes scrapped

Employer national insurance (NI) and tax advantages of salary sacrifice schemes will be scrapped from April 2017.

Employees who use salary sacrifice schemes will be subject to the same tax as cash income. 

Chancellor Philip Hammond announced the change in Autumn Statement 2016.

Employees using the scheme currently exchange some of their salary for non-cash benefits in kind, such a company car or mobile phone.

Benefits such as pensions, childcare, cycle to work and ultra-low emission cars will be exempt from the change.

Arrangements in place before April 2017 will be protected for up to 1 year, while cars, accommodation and school fees arrangements will be protected until April 2021.

Johnny Timpson, protection specialist at Scottish Widows, said:

“This will act as a disincentive to families seeking to improve their financial resilience at the very time that many working-age benefits have been, or will shortly be, significantly reformed.”

Kate Smith, head of pensions at Aegon, said:

“For pensions which encourage people to prepare for the future or childcare vouchers which help people return to work its business as usual so will still benefit from tax and NI breaks.”

Contact us today to discuss how these changes may affect you and your business.