HMRC Update on Salary Sacrifice Schemes

The rules for salary sacrifice arrangements changed with effect from 6 April 2017 and HMRC have updated their guidance for employers. Apart from the 5 exceptions, the amount assessed as employment income for new salary sacrifice arrangements is now the greater of the salary foregone and the taxable benefit as set out in the tax legislation.

Fortunately, the two most common arrangements are unaffected by the changes – childcare vouchers and pension contributions. The HMRC guidance reminds us of the importance of amending the employee’s contractual salary before the next salary payment. Remember also that the employee’s salary cannot be reduced below National Minimum Wage.