HMRC updates Salary Sacrifice guidance

12th August 2021 | News

HMRC has updated the guidance on salary sacrifice.

HMRC has removed the guidance on ‘Salary sacrifice arrangements set up before 6 April 2017’ as the transitional arrangements for calculating the value of the benefit came to an end on 5 April 2021.

A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit.

Employers can set up a salary sacrifice arrangement by changing the terms of the employee’s employment contract. The employee needs to agree to this change.

The impact on tax and National Insurance contributions payable for any employee will depend on the pay and non-cash benefits that make up the salary sacrifice arrangement.

An employer needs to pay and deduct the right amount of tax and National Insurance contributions for the cash and benefits they provide.

For the cash component, that means operating the PAYE system correctly via payroll.

For any non-cash benefits, an employer will need to work out the value of the benefit.

If an employer sets up a new salary sacrifice arrangement, they will need to work out the value of a non-cash benefit by using the higher of the:

  • amount of the salary given up
  • earnings charge under the normal benefit in kind rules.

For cars with CO2 emissions of no more than 75g/km, employers should always use the earnings charge under the normal benefit in kind rules.

Please contact us if you are considering setting up salary sacrifice arrangements to ensure these are effective.

Internet link: GOV.UK Salary sacrifice

Williamson & Croft is a market leading accountancy, advisory and tax firm with particular specialisms in property, construction, retail, digital and creative, technology and professional services.

News

Government considers 5 day isolation period

Calls to cut isolation period Chancellor Rishi Sunak has backed calls for a 5 day isolation period, meaning that the current Covid isolation period could be cut from seven days to five. Currently, those who test positive for Covid can leave self-isolation after seven...

Are you prepared for the expansion of Making Tax Digital for VAT?

MTD for VAT On 1st April 2022 it becomes mandatory for all VAT registered businesses to register for Making Tax Digital (MTD) for VAT. This is a departure from the current rules where it is only compulsory for people or businesses with a turnover above the VAT...

Contact

0161 399 0121

York House, 20 York Street, Manchester, M2 3BB

0151 303 3112

Avenue HQ Liverpool, 17 Mann Island, Liverpool L3 1BP

Contact us

© Copyright 2020 Williamson & Croft LLP - Registered No OC402211