The Spring Budget has been and gone, and companies are bracing for change. Despite that, one key announcement from the previous Autumn Statement seems to have been glossed over, and this is the significant changes to salary sacrifice arrangements.
As these can impact your business and company finances, Stipendia are here to provide a quick overview of the changes and how they can affect you.
Salary sacrifice allows employees to exchange a portion of their cash pay in return for non-cash benefits. These reduce the amount of taxable income and therefore reduce the PAYE and National Insurance Contributions (NICs) due on the employee’s remuneration.
From April 2017, the PAYE advantages of salary sacrifice schemes will be removed in an effort to ‘promote fairness in the tax system’. As a direct result of this, employees swapping salary for benefits will pay PAYE on the benefit, but will continue to receive National Insurance savings.
A quick summary below shows the various benefits and any changes that will be made from April.
|Name of Benefit||Current Saving||Savings from April 2017|
|Childcare Vouchers||Tax and NI||No change|
|Workplace nursery||Tax and NI||No change|
|Cycle to work||Tax and NI||No change|
|Gym benefit||NI||No change|
|Mobile phone benefit||NI||No change|
|Enjoy technology||NI||No change|
|Will writing benefit||NI||No change|
|Car parking||Tax and NI||Removal of Tax – but will continue to save on NI|
|Dining card||Tax and NI||Removal of Tax – but will continue to save on NI|
|Kids pass||Tax and NI||Removal of Tax – but will continue to save on NI|
The changes to salary sacrifice may have a significant impact on your own arrangements; under the new rules, most schemes will be affected. Both employers and employees may therefore wish to rethink their salary sacrifice plans.
Employees may still be eligible to join salary sacrifice schemes up until the 6 April 2017 deadline. However, from this point on, remaining in such a scheme may result in an additional PAYE tax bill.
Employers, on the other hand, will no longer benefit from employer NIC savings, and may be required to review staff members’ contracts, as salary sacrifice schemes may be incorporated into the terms and conditions of employee contracts.
Employers will also be required to report these benefits on a P11D form.
From 6th April 2017, the normal trigger point is when the salary sacrifice contract renews, auto renews, starts, ends or is modified / changed. At this point you must use the new rules. This should align with normal business as usual contractual arrangements.
However, if the existing contract is still in place on 6th April 2018, then there will automatically be a trigger point on 6th April 2018. This will be 6th April 2021 for cars with emissions over 75g CO2/Km, accommodation and school fees.
For more information on the changes to salary sacrifice, please contact us.