Government confirms plans to limit salary sacrifice

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Budget 2016: The government has confirmed it is considering limiting the range of benefits that attract relief on tax and national insurance contributions (NICs) when offered via salary sacrifice arrangements.

However, details of its intentions, set out in Budget 2016 documentation, stated that pension contributions, childcare and health-related benefits, such as bikes for work, should retain tax and NIC relief when provided through salary sacrifice arrangements.

Nick Boyton, client relationship director at Broadstone, said: “The Chancellor indirectly referred to salary sacrifice in his speech, and this suggested some considerable changes to salary sacrifice might be unveiled once we had the detailed budget information.

“Happily, the government is retaining the incentives for pension saving, childcare and health-related benefits but it is clear the range of options available will be reduced with benefits such as retail vouchers likely to fall victim to the change.

“Existing arrangements will need to be reviewed once the allowed range of benefits are confirmed.”

Steve Herbert, head of benefits strategy at Jelf Employee Benefits, added: “It appears that only the more unusual benefits that have found their way into salary sacrifice offerings will be targeted at this stage, which is good news for all those employers who rely on this mechanism to fund traditional employee benefit offerings.”

Find out more about all the latest developments impacting reward and benefits at Employee Benefits Live 2016 on 11-12 October at Olympia National, London