ABSTRACT
Flexible benefits are often linked to salary sacrifice schemes. Salary sacrifice became popular because of the different way in which pay and tax-free benefits are taxed. The idea behind salary sacrifice is that one swaps some pay on which they are charged income tax and National Insurance for a tax-free benefit in kind on which there is no tax or National Insurance. Taxable benefits include private medical insurance, a company car, gym membership and so on. The practice of employers providing benefits in kind has a variety of origins. Pensions can be traced back hundreds of years and were a way of compassionately retiring workers who were no longer fit enough to work. To some extent, employee benefits were displaced when the National Health Service and welfare state were established from 1948 onwards. It’s important to bear in mind that receiving benefits in kind can affect the amount of tax one pay.
