Group income policies and salary sacrifice

In December 2022 HMRC announced that it had revised its position on the taxation of group income protection policies funded through salary sacrifice arrangements. A result of this is that subject to a transitional period employees could be faced with an element of double taxation.

Employees who top up on core cover

The optional remuneration arrangements rules introduced from April 2017 created uncertainty over top-up payments made by employees. The Association of British Insurers (ABI) queried the position with HMRC and in 2019 HMRC stated that where employees seek to top up their core cover under these policies through the payment of additional premiums under salary sacrifice arrangements HMRC would be willing to treat these as employee rather than employer contributions. That in turn meant that it would reduce the taxable amount of any eventual sickness payment that arose from a claim under the...