A year ago the Government quietly scaled back generous tax breaks enjoyed by millions of workers. Luckily, thousands of pounds can still be saved using this loophole. Known as “benefits in kind”, these are perks offered by employers that can cut the tax bills of companies and their staff. Benefits offered in this way are not included with other taxable earnings, so workers pay less income tax and firms cut their National Insurance (NI) bill. Until recently there has not been clarity on exactly which benefits are tax-exempt and which aren’t. Employers were forced to get approval directly from HM Revenue & Customs for each scheme. However, since April 2017 the taxman has published a list of the perks that do qualify – any benefits not listed are assumed to be taxable. Philip Hammond, the Chancellor, branded so-called salary sacrifice schemes “unfair”. At the time, the Treasury said the move would generate an extra £260m in tax revenue. Salary sacrifice (sometimes called salary exchange) schemes have grown dramatically in popularity in recent years. Under these arrangements, benefits are paid out of income before it is taxed, saving on both income tax and NI. Some of the most valuable and most commonly used benefits were spared. These include childcare schemes, cycle-to-work programmes, low-emission company cars and, largest of all, pensions. All other benefits – including popular schemes such as car parking, mobile phones, health assessments and gym memberships – are no longer exempt. The rules are complex. For benefits not on the approved list, there will no longer be income tax or employers’ NI savings. However, employees will still benefit from lower NI. Some arrangements established before the changes take effect have transitional protections. Company cars (that do not qualify as low emission), accommodation and school fees have their tax exempt status protected until when the salary sacrifice arrangement was renegotiated or reviewed, or 6 April 2021 – whichever is earlier. Nick MacDuff, an employee benefits expert at Willis Towers Watson, the consultant, said the changes were not as damaging as many initially thought. He said: “It has simplified things – there is no longer the debate over whether something is or isn’t tax exempt. If it’s not on that list, it isn’t.” He added that some of the most popular work perks are, and have always been, taxable but are offered as part of a group package to secure better “bulk” rates. Remember that, in some cases, using salary sacrifice can affect other aspects of your finances. As you technically earn less, state benefits, maternity pay and even mortgage applications might be changed. Likewise, life insurance offered by your employer is usually linked to salary, so a lower salary could mean your families receive less money in the event of your death. Read the original article here Post navigation UK workers want dental insurance in their benefits plan Free breast-milk delivery offered as employee perk
