HMRC will not comment on a proposed salary sacrifice arrangement before it has been put in place. If there is a point of legal uncertainty you can contact the HMRC clearance team. Ask HMRC to confirm the tax and National Insurance contributions You can also use the payrolling benefits and expenses online service to show you’re collecting tax and benefits through your payroll. In general, benefits must be reported to HMRC at the end of the tax year using the end-of-year expenses and benefits online form. Reporting requirements for many non-cash benefits are different to those for cash earnings. bicycles and cycling safety equipment (including cycle to work).childcare vouchers and directly contracted employer provided childcare that started on or before 4 October 2018.
The only benefits you do not need to value and do not have to report to HMRC for a salary sacrifice arrangement are: Tax and National Insurance contributions exemptions on non-cash benefitsĮxemptions on benefits in kind do not apply to salary sacrifice schemes.
earnings charge under the normal benefit in kind rulesįor cars with CO2 emissions of no more than 75g/km, you should always use the earnings charge under the normal benefit in kind rules.If you set up a new salary sacrifice arrangement, you’ll need to work out the value of a non-cash benefit by using the higher of the: Calculate a non-cash benefitįor any non-cash benefits, you need to work out the value of the benefit. You need to pay and deduct the right amount of tax and National Insurance contributions for the cash and benefits you provide.įor the cash component, that means operating the PAYE system correctly through your payroll. The impact on tax and National Insurance contributions payable for any employee will depend on the pay and non-cash benefits that make up the salary sacrifice arrangement. Work out the effect on tax and National Insurance contributions
#SALARY SLIP EXAMPLES MANUAL#
There are some exceptions to this, Employment Income Manual 42755 gives more information. Salary sacrifice arrangements can allow opting in or out in the event of lifestyle changes like these.Īs a general rule, if an employee swaps between cash earnings and a non-cash benefit whenever they like, any expected tax and National Insurance contributions advantages under a salary sacrifice arrangement will not apply. changes to circumstances directly arising as a result of coronavirus (COVID-19).It may be necessary to change the terms of a salary sacrifice arrangement where a lifestyle change significantly alters an employee’s financial circumstances. Your employee’s contract must be clear on what their cash and non-cash entitlements are at any given time. If your employee wants to opt in or out of a salary sacrifice arrangement, you must alter their contract with each change. Change the terms of a salary sacrifice arrangement Employers must put procedures in place to cap salary sacrifice deduction and ensure NMW rates are maintained. Your employee needs to agree to this change.Ī salary sacrifice arrangement must not reduce an employee’s cash earnings below the National Minimum Wage ( NMW) rates. A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in returnĪs an employer, you can set up a salary sacrifice arrangement by changing the terms of your employee’s employment contract.