Salary sacrifice – a raid not just on the high paid

23 November 2016

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Chris Sanger, head of tax policy at EY, comments:

“Despite plenty of evidence that he was targeting the wrong people, the Chancellor has gone ahead with controversial proposals to remove the tax and National Insurance advantages of salary sacrifice arrangements. The effect of the change will apply income tax and Employers’ National Insurance Contributions to the higher of the value of the benefit received or to the amount of salary sacrificed.

“While he may have avoided undermining his environmental credentials by excluding low emission cars, the denial of relief for the many basic rate tax payers who benefit from salary sacrifice schemes sits oddly with a government committed to helping those who are ‘just about managing’. 

“Salary sacrifice has been a great enabler, allowing lower paid employees to choose the benefits they want, something previously only possible for those nearer the boardroom.  Denying relief when benefits are chosen in this way will also penalise those longer term employees, compared to new joiners who agree their benefits before they start work.”

Sue Robinson, employment tax partner at EY, adds:

“People who use such schemes for benefits such as health screening and mobile phones and tablets will be among those who see their tax bills rise.  Many of those benefits in kind are often portrayed as ‘perks’ for the higher paid, but the expansion of the salary sacrifice model over recent years will mean that large numbers of basic rate taxpayers will be impacted, particularly in sectors such as the health service.”