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Cuts to salary sacrifice benefits

There was another clampdown announced, this time on salary sacrifice schemes. Not a big surprise because this was referenced in the March 2016 budget.

Salary sacrifice is where employers enable employees to exchange some of their pay for non-cash benefits. This can reduce the amount of tax and national insurance (NI) paid.

The cut is significant because for a basic rate tax payer the saving is 32%, for a higher rate taxpayer it is 42% and 47% for an additional rate taxpayer.

This comes into force from 1st April 2017 and here is a list of benefits impacted by the changes:

  • Company cars (unless they’re ultra-low emission vehicles)
  • Work-related training
  • Car parking near your workplace
  • Health screening checks
  • Mobile phones, computers and other tech
  • Accommodation
  • Gym membership
  • School fees

The good news is that there are a few exceptions – pension contributions and advice, childcare, cycle to work schemes and ultra-low emission cars. Arrangements for cars, accommodation and school fees will continue until 2021.

Businesses which have schemes in place could be hit by these changes. Employers could withdraw benefits, such as private medical cover and screening checks, and put more strain on the NHS.

Image from Flickr by Iks Word Trip.

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