Salary Sacrifice Schemes

A question about : Salary Sacrifice Schemes

Hi - I'm interested in the salary sacrifice legislation that allows an employee to foresake a proportion of their salary in return for a number of tax-deductable schemes amd would like to understand a little more, in laymans terms about what is/isn't allowed.

I'm aware of a few popular schemes, such as pensions, childcare, cycle to work, parking fees, bus fares etc - I've gathered this info from reading the guidance on the hmrc websites. I'm also aware of the potential savings to employers through the 12.8% NIC savings.

My question (eventually!) is whether anyone is in a position to advise on other, lesser-known, schemes that may be feasible.. I'll list a few of my thoughts here but please feel free to offer advice on whether these are ok, or whether you know of others...ie insurance (PHI/Bupa), congestion charges (in London), high street shopping vouchers?

Many thanks for any advice you can offer.

Best answers:

• Hi,
  Your question would be best in the pensions board so I've moved it there for others who will be able to advise better.
• Forgive me if I'm missing something but why would the pensions board be the best place for a salary sacrifice query?
  Surely it will get the best advice on the employment board :confused:
• Erm ...
  perhaps because there's a STICKY thread pinned to the top of the pensions board where the OPs queries may have been answered in the 2 pages of discussion it contains?
  Dunno!
• Binary Finance, medical insurance like Bupa, dental insurance, permanent health insurance (lifelong ill health payments), critical illness insurance, high street shopping vouchers, life assurance are some other things that can be done through salary sacrifice and are in schemes that I know do them.
  A wide range of other things are probably possible, just think of what you want and if there's enough interest from other employees your employer can check with HMRC to confirm that it's acceptable to them.
  There may still be a tax charge for some of the items. Bupa for example. Income tax and NI could be treated differently for each individual item so each needs to be considered.
• I think you will find a lot depends on how your local tax office looks at it.
  As far as I know you can or at least could at one time work for no money and be paid in goods with no tax or NI by either employer or employee. Hippees for example picked the crops of farmers in exchange for the odd pig and a place for their tents.quite legally as long as they did not sign on the dole.
  Doing a salary sacrifice for you Asda bills paid by ICI is a bit of a no no though.
• Many thanks for all the replies received this far, much appreciated.
• FWIW, I sacrificed all the way down to minimum wage for base salary this year. My employer wouldn't let me go lower and wouldn't include car allowance in the calculation.
• Hi. There are schemes that allow salary sacrifice for any manner of things - the company I work for run them on behalf of companies for their employees. I have seen them including all manner of things including the above and also things like computers, retail vouchers to name a few.
  However be aware that alot of these benefits do still count as taxable benefits on your P11D so the HMRC will adjust your tax code in subsequent years. In addition you do still have to pay NI on a number of these benefits.
  The only real discount you can get is that as it is a large scheme then they may be able to negotiate better rates than if you attempted to get the benefits yourself.
• Binary Finance, I selected from the options offered by my employer, pension contributions being most of it, exploiting the current stock market situation with the expectation of buying at low prices over this year and possibly also next. All of the options I used have been mentioned already.
  Here are some examples of how the various options are taxed in one scheme:
  Benefit in kind tax (P11D income tax filing, or collected in payroll, depending on the scheme):
  yes: childcare vouchers above a limit, critical illness insurance, retail vouchers, private medical insurance, dental insurance, partner's life assurance
  no: bike, ill health income protection (PHI), life assurance, pension, childcare vouchers up to Ј55 per week
  Employee NI to pay:
  yes: childcare vouchers above limit, retail vouchers
  no: bike, critical illness insurance, private medical insurance, dental insurance, ill health income protection, life assurance, partner's life assurance, pension, childcare vouchers up to Ј55 per week
  As you can see, for many of the options the NI saving is the one that's significant, in addition to any volume discounts that might have been arranged. Since employee NI is only 1% for higher rate tax payers that could make some of the options less useful than buying them outside the scheme. Life assurance for a young and healthy person, perhaps.
• For bikes the employee can also save the VAT. We are just about to implement Salary Sacrifice Schemes for bikes and the employee will save about 40% on the cost of the bike.
  They will not pay the VAT and save NI and Tax. Our organisation will buy the bike of their choice (and reclaim the VAT) and then lease the bike to the employee under a hire agreement over 24 months.
  Amanda