The July Budget: salary sacrifice

In the run-up to the Budget, there was some concern that the chancellor might ‘call time’ on the use of salary sacrifice in employee benefits provision.

This was not mentioned in the Budget speech itself, but the following paragraph does appear in the supporting HM Treasury Summer Budget 2015 document:

“Salary sacrifice arrangement can allow some employees and employers to reduce the income tax and National Insurance that they pay on remuneration. They are becoming increasingly popular and the cost to the taxpayer is rising. The government will actively monitor the growth of these schemes and their effect on tax receipts.”

So the concerns would appear to be valid, albeit there is clearly no appetite to change this at the moment.

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That said, the most significant use of salary sacrifice is around pension contributions, and the entire system of pension tax reliefs may be subject to change in the not-too-distant future anyway.

For the moment, however, salary sacrifice (and indeed pension tax reliefs) remain unchanged for most.