The tax and NIC advantages of certain benefits provided as part of a salary sacrifice arrangement were removed from 6 April 2017. The new rules effectively remove the Income Tax and employer NIC advantages of certain benefits provided as part of salary sacrifice arrangements such as mobile phones and workplace parking.
When the changes were introduced it was confirmed that all arrangements in place before April 2017 will be protected for up to a year. This means that current contracts that remain under the pre-2017 rules will fall under the new rules from April 2018. The April 2018 deadline is extended until April 2021 for cars with CO2 emissions above 75g/km, accommodation and school fees.
The changes to the salary sacrifice rules are complex. We have reproduced below three examples of typical consequences published on the HMRC website:
| Salary | Salary sacrificed | Non cash benefit received | Consequence |
| £350 per week | £50 of that salary | Childcare voucher to the same value | Only £300 is subject to tax and NICs, childcare vouchers are exempt from both tax and Class 1 NICs up to a limit of £55 per week. |
| £350 per week | £100 of that salary | Childcare vouchers to the same value | £295 is subject to tax and NICs – PAYE is operated on the £250 cash component, childcare vouchers are exempt from both tax and Class 1 NICs up to a limit of £55 per week, £45 is reported as a non-cash benefit at the end of the tax year using forms P11D or P9D. |
| £5,000 bonus | £5,000 | £5,000 employer contribution to registered pension scheme | No employment Income Tax or NICs charge to the employee – the full amount is invested in the pension fund. |
Planning note
The following benefits are not currently affected by the new rules:
- Employer provided pensions and pensions advice;
- Childcare vouchers;
- Employer provided childcare or workplace nurseries;
- Bicycles and cyclist safety equipment including cycle to work schemes, and
- Ultra-low emission cars, below 75g/km.