Optional Remuneration Arrangements (OpRA)

Optional Remuneration Arrangements (OpRA) are the rules introduced from April 2017 to curb the tax efficiency of salary sacrifice. They apply when an employee gives up cash earnings in return for a non-cash benefit, or chooses a benefit instead of a higher cash alternative. Under OpRA, the taxable value of the benefit is the higher of (a) the cash forgone and (b) the modified cash equivalent under the BIK rules — so the employer can no longer engineer a value lower than the salary sacrificed.

A short list of benefits is exempt: pension contributions and pension advice, employer-provided childcare and Tax-Free Childcare top-ups, Cycle to Work, and ultra-low-emission company cars (CO2 ≤75 g/km). For these, salary sacrifice still saves both income tax and NI in the usual way. Everything else — gym memberships, mobile phones, private medical insurance, ICE company cars, 'flex' fund schemes — is caught by OpRA, meaning the employee pays income tax and Class 1A NIC on the salary they gave up, eroding most of the saving.

Worked example: Chen sacrifices £1,200 per year of salary for a private medical scheme that the employer values at £900 under standard BIK rules. OpRA forces the higher figure (£1,200) to be reported on the P11D, so Chen pays income tax on £1,200 rather than £900. The savings come from NI only, and even those are smaller than under pre-2017 rules. Pre-existing arrangements signed before 6 April 2017 enjoyed transitional protection that fully expired on 5 April 2021.