Answers · UK 2025/26

What is an Optional Remuneration Arrangement (OpRA) and how does it affect salary sacrifice?

An Optional Remuneration Arrangement (OpRA) is a salary sacrifice or flexible benefit arrangement where an employee gives up cash pay in return for a benefit. Since April 2017, the tax and NI advantage of most OpRAs is removed -- you pay tax on the higher of the cash forgone or the normal benefit-in-kind value. Exceptions include pension contributions, cycle-to-work, and ultra-low emission vehicles.

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OpRA rules were introduced in Finance Act 2017 to close the tax advantage of most salary sacrifice schemes. Before 2017, employees could sacrifice salary in exchange for a benefit-in-kind (BIK) and pay tax only on the lower BIK value, saving both Income Tax and National Insurance. Under OpRA, the taxable amount is now the higher of: (a) the normal BIK value of the benefit, or (b) the amount of salary forgone. For example, if you sacrifice £5,000 of salary for a mobile phone normally exempt from BIK, you now have a £5,000 taxable benefit because the salary forgone (£5,000) exceeds the nil BIK value. Exempt from OpRA treatment (still receive full tax/NI benefit): employer pension contributions, employer-provided pension advice (up to £500), cycle-to-work scheme, childcare vouchers (for those grandfathered before October 2018), employer-supported childcare, and cars with CO2 emissions up to 75g/km (including electric vehicles at 4% BIK in 2026/27). Arrangements in place before April 2017 were protected until the earlier of: a variation in the arrangement, a renewal date, or April 2021. All such protections have now expired. Employers must still report OpRA benefits on form P11D (or via payrolling) and pay Class 1A NI on the taxable amount. HMRC guidance is in the Employment Income Manual at EIM44000. For salary sacrifice pension schemes, no OpRA charge arises because pension contributions already have statutory relief -- this remains one of the most tax-efficient benefits an employer can offer.