As national insurance rates rise, salary sacrifice and optional remuneration arrangements provide some valuable tax breaks, explains Kate Upcraft, director, Kate Upcraft Consultancy Ltd
With the significant increase in National Insurance from April 2022, it makes absolute sense for employers to use salary sacrifice and optional remuneration arrangements (OpRA) as much as possible, as these will be a win-win situation for both employee and employer.
However, salary sacrifice is not a silver bullet that just provides tax and National Insurance savings; there are administrative considerations to ensure that it is handled successfully and compliantly.
Let’s begin with exploring why there are two names for this way of reconstructing an employee’s contract.
Salary sacrifice, strictly speaking, refers only to the carved-out benefits that HMRC did not include in the optional remuneration arrangement (OpRA) changes that took effect on 6 April 2017. These benefits were carved-out of the OpRA changes as politically the government still wanted to encourage employers to offer these benefits to employees in a tax-effective way. They are:
