Salary sacrifice for the provision of benefits in kind

07 December 2016

As announced at Autumn Statement, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017.

Geographical extent – The changes extend to all four nations of the UK. The draft legislation details the legislative amendments required for both Great Britain and Northern Ireland.

The reform will apply to arrangements where the employee forgoes cash in exchange for a Benefit in Kind (BiK), including salary sacrifice arrangements, flexible benefit packages with a cash alternative and BiKs where there is an option to take a cash allowance instead.

Arrangements relating to employer-provided pensions (including advice), childcare, Cycle to Work and ultra-low emissions cars will be excluded.

This change will have effect from 6 April 2017, although the government will protect those contracts that are already in place on this date until the earlier of:

  • a start, end, variation, renewal or auto-renewal of the contract,
  • or 6 April 2018, except for cars (with emissions above 75 g CO2 per kilometre), accommodation and school fees when the final date is 6 April 2021.

Ultra-low emission vehicles

A clause amends the appropriate percentage for ultra-low emission vehicles (cars with CO2 emissions of 0-75 grams per kilometre) for the purpose of calculating the taxable benefit of a company car. It also makes related changes to the appropriate percentage for conventionally fuelled cars.

The effect of the changes is that the appropriate percentage for cars in the lowest CO2 emissions category (1-50 grams CO2 per kilometre driven) will be based both on CO2 emissions as well as on the electric range of the car, which is the distance the vehicle can travel in pure electric mode. For cars with emissions of 51 grams CO2 per kilometre and upwards, the appropriate percentage remains based on CO2 only.

The changes have effect for the tax year 2020-21 and subsequent tax years.


The government has published a summary of responses document and tax impact and information notice (TIIN) which you can find at section 1.13 in the overview of legislation in draft. Draft legislation has also been published and can be found at page 100 and the explanatory note can be found from page 12.

The government would welcome any technical comments you have on draft legislation by 1 February 2017.

Please send your comments by e-mail, if possible, to: or alternatively, by post to: Alex Raisen, Room 1E/08, 100 Parliament Street, Westminster, London, SW1A 2BQ.