Salary Sacrifice
Salary Sacrifice can be used by an employee to reduce their salary and get the employer to pay for a benefit.
To be worthwhile the system needs to be Tax & NIC efficient
A £100 sacrifice will save the employer 13.8% employers NIC = £13.80
The cost to the employee is 100.00 less Tax 20.00% & NIC 12.00% = £68.00
The tax will be at the employees marginal rate, so the employees saving may be greater.
The employer may well find that there is a cost of buying into a scheme.
You will also need to consider:
Optional Remuneration Arrangements
The employer will still be responsible for paying the benefit during a period of Maternity/Paternity/Adoption leave.
HMRC salary sacrifice and non-cash benefits
You need to be careful that the National minimum wage rates are not breached.
HMRC The national minimum wage
This might affect the employees Tax Credits.
HMRC Tax Credit calculator
Child Vouchers
This can be used to reduce the earnings, which will reduce the Tax and NIC payments. The amount sacrificed can then be used to obtain Child vouchers.
There are several points to consider:
All employees are eligable.
The voucher is used for the employees child or stepchild.
The child care must be qualifing child care.
For employees joining after 6/4/2011 there is a reduced amount of saving if they are earning over the basic rate.
Employer-supported childcare - guidance and FAQs for employers
The table below shows the amounts that can be obtained tax(+NIC) free
Pay Frequency |
Weekly pre 11 |
Monthly pre 11 |
Weekly 11_13 |
Monthly 11_13 |
Weekly 13+ |
Monthly 13+ |
Basic Rate Maximum |
55.00 |
243.00 |
55.00 |
243.00 |
55.00 |
243.00 |
Higher Rate Maximum |
55.00 |
243.00 |
28.00 |
124.00 |
28.00 |
124.00 |
Additional Rate Maximum |
55.00 |
243.00 |
22.00 |
97.00 |
25.00 |
110.00 |
salarysacrifice 14/01/13
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