Will salary sacrifice be ending in April?

2nd_time_buyer

There are murmurings about higher rate tax relief on pension contributions ending and being replaced with a flat rate of either 20% or 25%. My thinking is for this to be effective than that they will probably also end salary sacrifice schemes, otherwise the effect of a drop in higher rate tax relief could be bypassed by sacrificing to a lower salary. Do you think this will be the case? 

JoeCrystal

Why bother asking?! No one really know... We will know once the Budget get released.

zagfles

The budget was cancelled. Almost certain no major changes like this would be made for April 2021. There are multi-page threads here about this every few months.

Prism

It would be difficult to implement. What would stop a company from actually just lowering somebodies salary and then paying a higher percentage of contributions instead - obviously with the employees approval. 

marlot

... the big problem with reducing the tax relief is working out how to apply it to employer contributions and DB schemes.

jamesd

No sign yet of the April budget having been cancelled and something is required then for Parliament to approve routine changes. November 2020 was cancelled.

dunstonh

Salary sacrifice has certainly increased the cost of pension provision.  If you look at all the tax "costs" to the treasury in respect of pensions, this has had the highest area of cost growth.     However, based on past comments from previous Governments, it is not easy to remove without unintended consequences and the fact that salary sacrifice uses the same method as normal employer contributions. 

Marcon

There are always murmurings. Why bother to speculate?

2nd_time_buyer

Marcon said:

There are always murmurings. Why bother to speculate?

My question was not so much whether higher rate tax relief will end but whether salary sacrifice is feasible if it is ended?

dunstonh

2nd_time_buyer said:

Marcon said:

There are always murmurings. Why bother to speculate?

My question was not so much whether higher rate tax relief will end but whether salary sacrifice is feasible if it is ended?

If salary sacrifice is ended, then it will cease to feasible by default as you wouldn't be able to do it.

JoeCrystal

zagfles said:

The budget was cancelled. Almost certain no major changes like this would be made for April 2021. There are multi-page threads here about this every few months.

Well, the Chancellor has announced that the government will publish the Budget on Wed 3 Mar 21. Considering how close it is to the following tax year, I imagined they wouldn't change too much of the tax system.