Changes to UK salary sacrifice schemes destroying benefits value Changes to UK salary sacrifice schemes destroying benefits value

Changes to UK salary sacrifice schemes destroying benefits value
16 Jul 2018

The value of taxable benefits offered to UK employees may have peaked, with changes to salary sacrifice schemes making many job perks increasingly pointless, according to government figures.

UK employers are offering their staff more taxable benefits than ever before, new data from Her Majesty’s Revenue & Customs (HMRC) shows, with the value of such offerings hitting a total of £8.3 billion (US$11 billion) in 2016/17, up from £8.1 billion (US$10.7 billion) in 2015-16. But the number of people receiving such benefits has dropped to 3.66 million, from 3.76 million in 2015-16, the latest Benefits In Kind Statistics report reveals.

Private medical and dental insurance was the most widely offered benefit, provided to 65% of those receiving them. Next most popular were company cars, at 26%, and excess mileage allowances at 6%.

But changes to salary sacrifice schemes mean the figures could represent a high watermark in providing benefits. Since April 2017, tax advantages have been removed from a range of perks, including health checks, gym memberships, parking, accommodation and most company cars.

Andrew Snowdon, head of tax at UHY Hacker Young, told People Management that the situation amounted to placing “stealth taxes” on the falling number of people who enjoyed taxable benefits.

"Despite many employees not seeing a rise in the headline rate of tax in the last few years, they are seeing an increase in these stealth taxes," he said. "It seems that HMRC has an irresistible desire to tax job perks – everything from late night taxis home from the office through to gym membership or health checks are now taxed."

The changes may prompt employers to cut back on both the range and size of benefits they offer. In particular, the HMRC report suggested that tax changes affecting company cars may already be having an impact on the value of benefits provided.

Since April 2017, drivers of new company cars have been taxed on either the benefit in kind value of their car, or the value of the cash alternative, whichever is higher. Drivers of existing cars, and those who ordered a car before the change, will remain on the previous tax arrangements until April 2021. Low-emission cars are exempt.

In general, higher earners receive higher-value benefits in kind, with the report highlighting a direct correlation between the average value of benefits and rising income among both employees and company directors.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

 

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The value of taxable benefits offered to UK employees may have peaked, with changes to salary sacrifice schemes making many job perks increasingly pointless, according to government figures.

UK employers are offering their staff more taxable benefits than ever before, new data from Her Majesty’s Revenue & Customs (HMRC) shows, with the value of such offerings hitting a total of £8.3 billion (US$11 billion) in 2016/17, up from £8.1 billion (US$10.7 billion) in 2015-16. But the number of people receiving such benefits has dropped to 3.66 million, from 3.76 million in 2015-16, the latest Benefits In Kind Statistics report reveals.

Private medical and dental insurance was the most widely offered benefit, provided to 65% of those receiving them. Next most popular were company cars, at 26%, and excess mileage allowances at 6%.

But changes to salary sacrifice schemes mean the figures could represent a high watermark in providing benefits. Since April 2017, tax advantages have been removed from a range of perks, including health checks, gym memberships, parking, accommodation and most company cars.

Andrew Snowdon, head of tax at UHY Hacker Young, told People Management that the situation amounted to placing “stealth taxes” on the falling number of people who enjoyed taxable benefits.

"Despite many employees not seeing a rise in the headline rate of tax in the last few years, they are seeing an increase in these stealth taxes," he said. "It seems that HMRC has an irresistible desire to tax job perks – everything from late night taxis home from the office through to gym membership or health checks are now taxed."

The changes may prompt employers to cut back on both the range and size of benefits they offer. In particular, the HMRC report suggested that tax changes affecting company cars may already be having an impact on the value of benefits provided.

Since April 2017, drivers of new company cars have been taxed on either the benefit in kind value of their car, or the value of the cash alternative, whichever is higher. Drivers of existing cars, and those who ordered a car before the change, will remain on the previous tax arrangements until April 2021. Low-emission cars are exempt.

In general, higher earners receive higher-value benefits in kind, with the report highlighting a direct correlation between the average value of benefits and rising income among both employees and company directors.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

 

OTHER ARTICLES YOU MAY WANT TO READ

Only 20% Of UK Employers Ready For New OPRA Rules
Employer-Supported Childcare In Force As Of 4 October
HRMC Issues Two New Communications About UK Regulatory Change

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