Salary sacrifice arrangements could come under threat, as the Treasury has announced it will ‘actively monitor’ these schemes and the resultant tax lost to the exchequer.
While there are no imminent plans to crack down on the salary sacrifice regime, Budget documents say that the arrangement will come under the Treasury’s microscope.
Salary sacrifice allows employers to offer staff cash and non-cash benefits in a tax-efficient way, and allow the employee to avoid paying national insurance contributions and income tax that is normally levied on the salary. Salary sacrifice is also used for pension contributions.
Budget documents said: ‘Salary sacrifice arrangements 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.’
The news follows comments made in June by the former pensions minister Steve Webb who said salary sacrifice could be cut by the current government.