Budget 2016: Salary sacrifice to be cut - but not for pensions

The government plans to limit the use of salary sacrifice but will continue to allow it for pension saving, childcare and health-related benefits such as cycle to work.

According to the Budget 2016 documents, clearance requests for salary sacrifice arrangements from employers to HMRC have increased by over 30% since 2010.

However it acknowledged that it wanted to encourage employers to offer certain benefits but is concerned about the growth of salary sacrifice schemes.

“The government is therefore considering limiting the range of benefits that attract income tax and NICs advantages when they are provided as part of salary sacrifice schemes,” it said.

“However, the government’s intention is that pension saving, childcare and health-related benefits such as cycle to work should continue to benefit from income tax and NICs relief when provided through salary sacrifice arrangements.”

No details were released about what benefits would be targeted and how much this would save HM Treasury.