Marvin OnumonuHMRC published two surveys highlighting that salary sacrifice pension schemes and Benefit in Kind arrangements could be changed in the Autumn Budget.
The first survey looked at employer attitudes to possible changes in salary sacrifice for pensions.
Employers said that removing National Insurance contributions (NIC) exemptions would likely affect staff morale, but that a cap, such as only charging NIC on salary sacrificed above £2,000 a year, would be easier to explain to employees.
A second survey found Benefits in Kind were most common among medium and large employers, with workplace parking at 39%, company cars at 29% and cycle to work schemes at 23%.
Around a quarter of these employers offered Benefits in Kind through salary sacrifice schemes.
Caroline Harwood, head of employment tax at BDO, said: “You can understand why the chancellor might be interested in reviewing the tax reliefs for pensions salary sacrifice schemes.
“The most recent figures show that the cost of NIC tax reliefs from contributions to, and benefits from, registered pension schemes reached £23.5bn in 2023/24.
“Meanwhile the cost of Income Tax relief for registered pension schemes reached £28.5bn in the same period.”
Harwood added: “Previous chancellors have shied away from taking this ‘low hanging fruit’ because of the furore that changes to pensions tax causes – and because saving for retirement has generally been seen as something to encourage.
“One subtle way the chancellor could feasibly seek to cut some of this cost would be by limiting the NIC exemption to say £2,000 to £5,000 of total salary sacrificed for all benefit types – after all the self-employed cannot benefit from this perk.
“However, such a change would still be unpopular and reduce incentives for employers to offer salary sacrifice schemes and for employees to make suitable provision for their retirement.”
She said: “It would also add new burdens on employers who would have to calculate the excess if people went over the threshold.
“Employees currently using Benefit in Kind incentives through salary sacrifice schemes could also lose out if the current incentives were reduced.
“This could have a particularly big impact on those taking advantage of such schemes to lease Electric Vehicles – another arrangement previously encouraged in the context of the path to Net Zero.”
