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Lloyd & Co
Chartered Accountants

103-105 Brighton Road
Coulsdon
Surrey, CR5 2NG
020 8668 0500
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Source: HM Revenue & Customs | | 29/04/2021

A salary sacrifice arrangement is effectively an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit. This can include items such as company cars, childcare vouchers and additional employer pension contributions.

The tax and NIC advantages of certain benefits provided as part of a salary sacrifice arrangement were removed from 6 April 2017. The change effectively removed the Income Tax and employer NIC advantages of certain benefits provided as part of salary sacrifice arrangements such as mobile phones and workplace parking. There was a transitional plan in place for certain benefits until 6 April 2021.

If an employee wants to opt in or out of a salary sacrifice arrangement, the employer must alter their contract with each change. The employee’s contract must be clear on what their cash and non-cash entitlements are at any given time.

It may also be necessary to change the terms of a salary sacrifice arrangement where a lifestyle change significantly alters an employee’s financial circumstances.

This may include:

  • changes to circumstances directly arising as a result of coronavirus (COVID-19)
  • marriage
  • divorce
  • partner becoming redundant or pregnant

Salary sacrifice arrangements can allow opting in or out in the event of lifestyle changes like these.



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