Salary sacrifice pension perks and Benefits in Kind face cuts in upcoming Autumn Budget

HMRC 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.”