Autumn Statement 2016 – Changes announced to Salary sacrifice

Following the recent consultation, the announcement to changes to salary sacrificed arrangements did not come as a surprise. A salary sacrifice arrangement allows an employee to give-up some of their salary in return for a specified non-cash benefit in kind. This could provide savings to both the employer and the employee if the benefit was either not taxable, or taxed at a lower rate than the equivalent amount of salary.

With effect from April 2017, most salary sacrifice arrangements will be subject to the same tax as the ‘sacrificed’ income.  There are specific exemptions from these new rules for pensions, childcare, ultra-low emission cars and cycle to work schemes.  In addition, all arrangements that were in place before April 2017 will be protected for up to a year and arrangements relating to cars, accommodation or school fees will be protected for up to four years.