The move, which will cost £10m in its first year, is designed to curb the tax advantages of salary sacrifice and benefit in kind schemes, which the government is concerned can create an uneven playing field between employees and employers using such arrangements.

Several health-related benefits-in-kind such as cycle to work are not included in the consultation as the government wishes to encourage their use. In its summary of consultation responses, the government noted it was feared employees would choose less environmentally-friendly options or drive their existing cars for longer without an exemption for ULEVs.

As such, vehicles with emissions under 75 grams of CO2 per kilometre are to be exempted from the changes to incentivise the take-up of such vehicles.

The changes to salary sacrifice are set to come in from 6 April 2017 are projected to save the government approximately £85m in its second year and £235m per year by 2018/19 until 2020/21, according to official figures.

The government calculated in the proposal’s consultation that the current loss to the Exchequer through salary sacrifice can amount to as much as £321 per basic rate taxpayer, £391 per higher rate taxpayer and £426 per additional rate taxpayer.

The new rules will also exempt pensions saving, employer provided pensions advice and childcare, the government confirmed.

Those already in salary sacrifice contracts as of 6 April 2017 will become subject to the new rules for any new salary sacrifice arrangments but current contracts will not be affected until they end, change, are modified or renewed. Car agreements will be protected until 6 April 2021, although most car schemes run for maximum three years.

Accommodation and school fees will also be exempt until 6 April 2021.

The summary of the consultation responses can be read here.

The policy paper can be read here.