An effective salary sacrifice arrangement allows an employee to give up part of their salary in exchange for a benefit, which itself may be exempt from tax and NIC. This can generate tax and NIC savings for employee and employer.
Following consultation, the tax and NIC advantages of salary sacrifice arrangements will be removed from April 2017. Such arrangements in place for pension contributions, childcare, cycle to work and ultra low emission cars, will not be effected by these changes. Any other arrangements in place before April 2017 will be protected until April 2018 and those relating to cars, accommodation and school fees will be protected until April 2021.
The changes will limit the use of salary sacrifice arrangements after April 2017. As a result, employees swapping salary for benefits such as mobile phones, will pay the same tax as those employees who do not receive benefits. In addition, employer NIC savings will be restricted.