01 Dec Changes to salary sacrifice schemes
One of the big changes to come out of the recent Autumn Statement was the announcement that there will be a clamp down to the tax benefits of certain salary sacrifice schemes from April 2017. This change is likely to affect millions of employees who have sacrificed part of their salary and are currently paying less tax as a result.
A consultation that looked at restricting the Income Tax and National Insurance Contributions advantages for benefits in kind provided as part of salary sacrifice arrangements was launched in August and closed on 19 October. The consultation stated that employer pension contributions, employer-provided pension advice, employer-supported childcare and provision of workplace nurseries and cycles and cyclist’s safety equipment provided under the cycle to work scheme would remain unaffected by this measure. It appears that the government has kept the exemptions from the scheme as set-out above and has also added ultra-low emission cars to the list.
It has also been confirmed that all arrangements in place before April 2017 will be protected for up to a year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to 4 years. This gives employees a small window of opportunity to start or extend their salary sacrifice arrangements to take advantage of the 1-year and 4-year protections from the new rules.
Employers and employees may also start to show a greater interest in driving ultra-low emission cars given the environmental and tax benefits. The exact details of the proposed changes to the salary sacrifice schemes are still to be published. We will add further comment on the changes when more facts have been released.