Hmrc warning for millions of workers who get employment perks

A warning from HMRC has been issued to millions of UK households who receive employee benefits. A recent HMRC survey suggests that valuable employment perks could be at risk, with a warning

issued to millions utilising salary sacrifice pension schemes. In addition to salary sacrifice, workers who benefit from Benefit in Kind arrangements could potentially be targeted by the

Labour Party ahead of the Autumn Budget. It is speculated that the Chancellor, Rachel Reeves, might impose restrictions on these perks. HMRC has conducted a survey, titled:

"Understanding the attitudes and behaviours of employers towards salary sacrifice for pensions." The survey presents hypothetical scenarios regarding potential changes to salary

sacrifice schemes for pensions. One scenario proposed the removal of the NIC exemption for both employers and employees, resulting in employer and employee NIC charges on the salary that the

employee sacrificed, reports Birmingham Live. Another scenario suggested removing both the NIC exemption for employers and employees and the income tax exemption for employees, on the

salary sacrificed. A third scenario proposed removing the NIC exemption but only on salary sacrificed above a £2,000 per year threshold. Following this, HMRC initiated a second consultation,

titled: "Research with employers on Benefits in Kind and expenses". Caroline Harwood, head of employment tax at BDO, commented on the potential review of tax reliefs for pensions

salary sacrifice schemes by the chancellor: "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. "Previous chancellors have shied away from taking this 'low hanging fruit' because of the furore that

changes to pensions tax causes – and because saving for retirement has generally been seen as something to encourage." Harwood also suggested a subtle approach the chancellor could

take: "One subtle way the chancellor could feasibly seek to cut some of this cost would be by limiting the NIC exemption to say £2,000 to £5,000 of total salary sacrificed for all

benefit types – after all the self-employed cannot benefit from this perk. However, such a change would still be unpopular and reduce incentives for employers to offer salary sacrifice

schemes and for employees to make suitable provision for their retirement. It would also add new burdens on employers who would have to calculate the excess if people went over the

threshold. "Employees currently using Benefit in Kind incentives through salary sacrifice schemes could also lose out if the current incentives were reduced. This could have a

particularly big impact on those taking advantage of such schemes to lease Electric Vehicles – another arrangement previously encouraged in the context of the path to Net Zero."