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    • MichelleUK
    • By MichelleUK 26th Jan 17, 4:26 PM
    • 323 Posts
    • 199 Thanks
    MichelleUK
    Hi James,

    I have had a look at your other posts and hopefully have some figures for you to clarify your tax situation. I have ignored NI as it will only complicate things.

    Your problem seems to be a misunderstanding of your salary sacrifice car. The figures on your other post, for the lease value of your car, do not quite tie in to the lease figure on this post but it should help to clarify things. You have chosen a company car with a value of £41,980 and the benefit on this car per annum is 25% (as per the lease quote in your other post). That means that you have a benefit in kind on the car of £41,980 x 25% = £10,495. The annual lease cost per the quote is £7,175.64 (although you mention it is £7,624 in this post). So, you get taxed on £10,495 car benefit (or more based on the figure in this post). This is one of the foibles of the HMRC company car tax rules - you can end up paying tax on a bigger benefit than you actually received.

    Your tax situation, based on a full year would be:

    Basic salary £40,000
    Car salary sacrifice £7,624
    Life £326
    Medical £546
    Pension £ 5200
    Total Salary and benefits £53,696

    That means that you have gone £1,696 over your package total, so to allow for this, your employer deducts it from your salary, hence the £38,304 going through your payslip as taxable.

    Calculation

    Taxable Salary £38,304
    Car benefit £10,495
    Medical benefit £546
    Total Pay £49,345

    Less: Tax Allowance £11,000

    Taxable Pay £38,345

    £32,000 @ 20% = £6,400
    £6,345 @ 40% = £2,538
    Total Tax £8,938

    Hope that this makes things a little clearer!
    • MichelleUK
    • By MichelleUK 26th Jan 17, 10:13 PM
    • 323 Posts
    • 199 Thanks
    MichelleUK
    James, I am not sure how much you have read about taxation of company cars, but it is a bit of an art form to select a car that will work out well tax wise. The lease cost is very deceptive as it bears little relation to the taxable benefit.

    My partner qualifies for a company car and every 3 years when he starts a new lease he spends days with a spreadsheet working out the best car that he can get for the lowest tax.

    Based on the car quoted in your other post, the P11D cost is enormous (i.e. 41,980 @ 25% = £10,495 taxable benefit). That will be 27% next year, so 11,335 taxable in 2017/18.

    If you ask your lease company for a new quote for the actual car you have, we can work out your actual tax position. It is not as easy as asking for a quote based on being a 20% or a 40% tax payer as your car actually straddles the band, so ask them to provide it based on 20% and we can work it out from there.

    My partner chose a BMW 3 series edrive hybrid with all the bells and whistles with a cost of £44,050. It has really low emissions, so the rate applied is only 7% - meaning the taxable benefit is only £3,083. The funny thing was, while he was waiting for it from the factory, he was given a crappy old Skoda and that had a taxable benefit of £4,001.
    Last edited by MichelleUK; 26-01-2017 at 10:19 PM. Reason: Extra bit...
    • James Blonde
    • By James Blonde 31st Jan 17, 7:06 PM
    • 21 Posts
    • 4 Thanks
    James Blonde
    Thanks Booksurr and Michelle - I'll try to get the information about a new quote. And yes, it absolutely is a misunderstanding of my salary sacrifice car

    What you say I think makes sense - it's effectively the BIK that puts me back into the 40% band.

    I guess the reason I feel so miffed (both at myself and the lease company) about the car is because I specifically asked the lease company if there would be any other charges, deductions, etc other than those provided in the original quote and they said no. I specifically asked how it would be taxed, and was never given an answer. I took them at their word, asked for help to properly understand and didn't really get it, and didn't look into it any further. They also never actually provided me for a full breakdown for my actual final specification which didn't help in trying to understand it all.

    I guess the question I need to ask myself now is, is it going to be best for me to pay the ~£2K to get out of the lease and start again, or stick with the car for the remaining 3 years and 6 months of the lease.... Part of me is almost wondering what happens to the car if the lease is terminated, and would I be as well off looking to buy the car! I suspect not, but hmm...
    • James Blonde
    • By James Blonde 1st Feb 17, 2:05 PM
    • 21 Posts
    • 4 Thanks
    James Blonde
    So, the actual quote for my car is:


    P11D value - £43540
    Emissions are 137g and it's a diesel (so 27%)


    That gives the cash equivalent value as £11755.80,


    which at 20% would be £2351.16,
    or at 40% would be £4702.32.
    • vanessa1977
    • By vanessa1977 9th Feb 17, 6:40 PM
    • 4 Posts
    • 0 Thanks
    vanessa1977
    Hello

    I received a letter from HMRC. I have three regular employments and the first one is 110L, with the other two rated at BR (this much I understand!). My personal allowance for 2017-2018 is 11560 (11500 + 60 job expenses). They have added an adjustment to rate bands as they estimate my income will be taxable at a higher rate. My total income 2015-2016 was just over 42000. The adjustment is 10451 so my total tax free amount is only 1109. I am struggling to understand this as I assumed everyone was entitled to the personal allowance. Can anyone please advise me further before I call HMRC?
    • Dazed and confused
    • By Dazed and confused 9th Feb 17, 10:03 PM
    • 1,868 Posts
    • 830 Thanks
    Dazed and confused
    You aren't losing the personal allowance, HMRC seem to be letting you still pay basic rate tax at the second and third jobs and are making an adjustment to your main job tax code to account for the 40% tax they think will be due.

    You can check what HMRC estimate your pay will be by looking on your personal tax account on gov.uk and you can amend this if you thinks its wrong.

    If the code is confusing you then you could always ask for 40% tax to be deducted at the second and third job (or just one of them if necessary) and have your main tax code back to normal.

    This won't change how much tax you pay overall just the amounts each individual employer deducts
    • James Blonde
    • By James Blonde 14th Feb 17, 8:05 PM
    • 21 Posts
    • 4 Thanks
    James Blonde
    Urgh, so my tax code notice has come in today, and I have a tax code of K467, so that's a personal allowance of -£4684. This is calculated as being my personal allowance (£11500) - car benefit (£12626) - underpayment restriction (£3558).

    So does that mean I'm basically paying 20% on £27246, and 40% on the rest??? Is my salary about to be massively slashed?

    I'm trying to use this site to get an idea of how much I'm being stuffed here:

    http://www.thesalarycalculator.co.uk/salary.php

    and this is where everything goes wrong, as no matter how I've entered figures in the past, they've never seemed to add up to what I actually get paid, which is ultimately why I'm so confused about this whole salary / benefits thing. I fear I'm about to be £3-400 a month worse off next tax year, so around about £1000 a month worse off over taking the car or not taking the car, for a car I could potentially have privately leased for about £400. This is truly awful.
    Last edited by James Blonde; 14-02-2017 at 8:17 PM.
    • booksurr
    • By booksurr 14th Feb 17, 9:43 PM
    • 3,614 Posts
    • 3,996 Thanks
    booksurr
    Urgh, so my tax code notice has come in today, and I have a tax code of K467, so that's a personal allowance of -£4684. This is calculated as being my personal allowance (£11500) - car benefit (£12626) - underpayment restriction (£3558).
    Originally posted by James Blonde
    so your basic salary is £40,000
    using the 17/18 rates your numbers will be:
    taxable income 40,000 + 4,670 = 44,670
    tax free amount = 0
    basic rate band (17/18) first 33,500 x 20% = 6,700
    higher rate band 44,670 - 33500 = 11,170 x40% = 4,468
    total income tax payable for the year 6700+4468 = 11,168

    Obviously you do not pay NI on taxable benefit and NI will be calculated monthly on your basic pay only rather than annually, but for example purposes, the approx annualised amount will be:
    first 8164 tax free
    next 40,000 - 8164 = 31,836 x 12% = 3,820
    you do not have NIable pay above the higher rate threshold for NI (£45,032) so all is charged at 12% and none at the 2% rate

    your net take home pay will be approx 40,000 - 11,168 - 3,820 = 25,012 pa (or about £2,084 pcm)
    Last edited by booksurr; 14-02-2017 at 10:08 PM.
    • James Blonde
    • By James Blonde 14th Feb 17, 11:49 PM
    • 21 Posts
    • 4 Thanks
    James Blonde
    and that's taking everything into account, including my benefits, car and deductions? So perhaps not quite as bad as I feared... Thanks so much booksurr, really appreciate the help, whether the answer is bad (or whether it's pointing out my naivety / stupidity!) or not!
    • richay
    • By richay 13th Jul 17, 1:28 PM
    • 7 Posts
    • 0 Thanks
    richay
    For a few years ive been earning less than personal tax allowance BUT I contribute a considerable amount to works pension monthly. Because i dont pay tax (because of the allowance), friend says cant get any £ back from tax office for my contributions!. Is this sad but true?
    • Dazed and confused
    • By Dazed and confused 13th Jul 17, 9:31 PM
    • 1,868 Posts
    • 830 Thanks
    Dazed and confused
    You cannot get back something you haven't paid in the first place.

    If pension is deducted before tax is calculated you may have saved tax if your salary was above the personal allowance and pension brought it down below the personal allowance.

    Who can say though without any hard facts or figures
    • SYTax
    • By SYTax 13th Jul 17, 9:45 PM
    • 12 Posts
    • 1 Thanks
    SYTax
    In your case, it sounds like you won't be able to claim any historical tax back.

    Going forward, you should try and make sure you are contributing to a 'relief at source' pension (google this). This will give you a 25% boost as the money goes into a pension pot. You get this even if your income is below the personal allowance.

    If your employer doesn't offer this type then your only option is a personal pension. Note there is a limits on how much you can put in a personal pension, particularly as a low earner. Don't give up employer match contributions though - this will be better than the 25% boost.
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