Autumn Budget Statement (1): Salary Sacrifice
Philip Hammond has just concluded his first* Autumn Budget Statement.
We will be reviewing the statements made around Employee Benefits in more detail over the next few weeks, but for the moment we will aim just to publish a series of posts with the headline messages in this area.
Probably the most significant topic was the restriction/removal of the Salary Sacrifice mechanism for some benefits. Our post earlier this week (which can be read here) highlighted the worry that the planning time to deliver this change may prove problematic for UK business, and indeed this now appears to be the case as change will take place as early as April 2017. That said, employers with existing arrangements in this space appear to have another year to plan (April 2018).
The HM Treasury supporting document includes the following text:
“Salary sacrifice – following consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars. This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021 (20)”
This short timeline is likely to pose a genuine problem for many employers who may have to rethink their benefits offering.
Another change worth highlighting here is the inclusion of “ultra-low emission cars” in the grouping of benefits that will be excluded from this change.
We will doubtless comment further on this major change in the next few days.
*and also his last, given that the Autumn Budget Statement is to be scrapped.
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