New Forest

05/11/2021

Salary sacrifice could ‘dampen increased NICs costs’

Salary-sacrifice arrangements could help employees negate the National Insurance contributions (NICs) rise during 2022/23.

 

NICs will rise by 1.25% for employees, employers and the self-employed from April 2022 to fund the Government’s new health and social care levy.

In some scenarios, employees and employers can get around this by striking a salary sacrifice deal to reduce an employee’s gross pay in return for certain non-cash benefits, such as pension contributions.

This is a tax-efficient way to pay or boost pension contributions up to a limit, as the amount of salary exchanged is not liable for income tax or class 1 NICs.

Effectively, the non-cash benefit could become an employer pension contribution while reducing an employee’s NICs liability and also the employer’s NIC liability.

However, going down this route might lead to a reduction in some state benefits and could affect mortgage applications and employee benefits.

For further information on managing costs, please contact James Alesbury on 023 8046 1222.

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