United Kingdom

Budget commentary re Salary Sacrifice

July 2015


Paul Nanon, Principal at Aon Employee Benefits comments: “Rumours ahead of the Summer Budget 2015 that salary sacrifice schemes would be attacked failed to materialise, however the government explicitly called out that the growth of such arrangements and their financial impact is being monitored. Organisations looking to introduce salary sacrifice schemes, especially for pension contributions, should factor in the potential restriction or removal of these schemes in the short-term when deciding whether or not to implement.

Ironically, tax-efficient salary sacrifice schemes, like buying holiday or green cars, offer a smart way for employees with adjusted income greater than £150,000 to reduce their earnings and the erosion of their Annual Allowance from April 2016. Pension salary sacrifice would not be effective in this scenario though, since adjusted income includes taxable earnings and all pension contributions.

HMRC’s current Know Your Customer initiative, which aims to better understand an organisations approach to employee reward, may well provide a platform for increased focus on tax compliance. Consequently the importance of obtaining HMRC clearance for salary sacrifice arrangements becomes even more essential.”



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