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Salary sacrifice changes

What is salary sacrifice, and how will the changes impact on you?

The change to salary sacrifice came as no surprise, and is part of the Government’s wider intention to ‘close the tax gap’ – that is the difference between what it believes it should be receiving if the rules were applied as intended and what it actually receives.

The change is expected to raise £235m per annum.

Salary sacrifice which allows employees to swap some of their salary for other benefits, can give tax and National Insurance advantages to both employers and employees. The Government’s aim is to ensure that employees who swap salary for benefits will pay the same amount of tax as those who buy them out of post tax income.

The change will not affect employees who give up salary in return for an employer’s pension contribution, which is one of the most common uses of salary sacrifice.

Those who use salary sacrifice to pay for child care, cycle to work schemes and low emission cars will also continue to benefit.

Most other arrangements in place before April 2017 will continue to benefit until April 2018. Those using salary sacrifice to meet the cost of cars, accommodation or school fees will have a longer stay of execution, until April 2021.

The ever-changing landscape of personal and business tax means that getting financial advice has never been more important.