Is Osborne planning to scrap salary sacrifice?

The schemes – which minimise National Insurance contributions for employers and employees and are currently used mainly by lower and middle earners – will become attractive for higher earners for pensions if flat rate tax relief is introduced.

But employee benefits consultancy Portus believes the Chancellor could ban the use of salary sacrifice in order to stop higher earners beating the expected move to equalise tax relief at a rate between 25% and 33%.

Potential pension rule changes could include making all employer pension contributions subject to National Insurance contributions saving around £8 billion a year or cutting the Annual Allowance further from its current £40,000.

Portus Consulting Commercial Director, Steve Watson, said:

“People are forgetting that higher earners can simply pay contributions via salary sacrifice and still receive effective higher rate tax relief as a way round the equalisation of tax relief.

“It may well be that the Chancellor takes the opportunity to make other benefits subject to National Insurance and effectively stop or dramatically reduce the advantages of salary sacrifice across the board.”