As had been widely anticipated, the Chancellor of the Exchequer announced in his Autumn Statement that the Government is making changes to salary sacrifice arrangements so that many schemes that currently attract tax and National Insurance Contributions (NICs) advantages will no longer do so from 6 April 2017.

The way salary sacrifice schemes work is that the employee accepts a cut in pay in exchange for a non-cash benefit, such as car parking at or near their workplace, childcare vouchers or health checks. The reduction comes out of the employee’s pre-tax salary, so they pay no Income Tax or employee NICs and the employer does not pay employer NICs on the sum sacrificed.

The following benefits provided through salary sacrifice schemes will cease to offer employee tax perks or employer NICs perks:

• Accommodation;
• Car parking at or near the place of work;
• Company cars (other than ultra-low emission vehicles);
• Gym membership;
• Health assessments;
• Mobile phones, laptops etc.;
• School fees; and
• Work-related training.

Arrangements under salary sacrifice schemes that are already in place are protected until April 2018, except for those relating to cars, accommodation or school fees, which are protected until April 2021. After that, employees will have to pay tax on the amount sacrificed as if it was income and employers will have to pay NICs. The employee exemption from NICs on the amount sacrificed will, however, remain. Employees have until 5 April 2017 to join an existing salary sacrifice scheme if they wish to take advantage of the perks available until these are withdrawn.

The following benefits are exempt from the changes:

• Employer-supported childcare;
• Cycle-to-work schemes;
• Ultra-low emission cars (those with CO2 emissions of up to 75g/km); and
• Pension contributions.