Employees face higher tax bills on salary sacrifice schemes

Salary sacrifice schemes have been limited in the Chancellor’s Autumn Statement, with the range of benefits being significantly restricted.

The changes will take place from April 2017, although changes to some schemes will be phased in over a longer period. Ultra-low emission vehicles will be exempt from the tax changes, along with pensions and pension advice, bikes for work and childcare. Any arrangements that were in place prior to April 2017 will be unaffected until April 2018, while any formalised arrangements for school fees, accommodation and cars will have protection until 2021.

Chancellor Philip Hammond stated that it was “unfair” for those employees that have access to salary sacrifice to pay less tax than those who are taxed on a cash salary. As a result, he has announced that employees who utilise the salary sacrifice schemes will pay the same tax as other employees as of April 2017.

Prior to the announcement, there had been a consultation running between 10th August and 19th October this year. According to a tax partner from Deloitte, Mark Groom, the tax implications for many will be significant, despite the fact that the tax gained from the measure will be £85m in the first year (2017-18) and £235m per year after that.

Employees in the Wirral who find that they pay more tax following the changes may decide to opt for other tax-saving measures, although it is advisable to seek professional advice from a financial adviser.

Tax Planning advice is not regulated by the Financial Conduct Authority.

Source: https://www.employeebenefits.co.uk/issues/november-online-2016/government-limits-tax-efficient-salary-sacrifice-arrangements/

Posted by Mark
6th December 2016

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All blogs and news on Endeavour Financial Planning are for information purposes only and are not intended to provide advice. Please seek the advice of a financial advisor before making any financial decisions.

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