With the governments Autumn Statement reduction of 2% in the standard rate of National Insurance Contributions from the current 12% to a new 10% from 6th January 2024, it’s all good news for those who pay National Insurance.
Salary Sacrifice arrangements have remained popular with employees often able to benefit by the reduction of the primary NIC 12%. High earners the 2%. this provided a perceived discount to the net cost of the benefits provided.
With the reduction to 10% then there is a salary sacrifice benefit saving loss equal to the drop. So for many that are part of salary sacrifice benefit schemes, there will be a potential loss of NI savings of 16.7% of the former NI saving.
As an example, for £100 pension sacrifice, the net cost for a basic rate tax payer was £68. With the change the net cost is £70 which represent an increase of 2.9%.
For an NI only benefit such as medical, the net was £88 and is now £90 an increase of 2.3%.
So the pension salary sacrifice, or the bike, childcare or tech scheme perceived saving benefit will reduce – a little.
Employers will also need to consider whether their salary sacrifice schemes will be impacted by the rise to National Minimum and National Living Wage. Will more employers face NMW breach. Review is essential especially where earnings are close to minimum pay levels.
PAYadvice.UK 23/11/2023