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  • FIRST POST
    • vundoyo
    • By vundoyo 9th Feb 18, 11:17 AM
    • 3Posts
    • 0Thanks
    vundoyo
    New to Company Car Tax
    • #1
    • 9th Feb 18, 11:17 AM
    New to Company Car Tax 9th Feb 18 at 11:17 AM
    Hello,

    I am looking for some help with understanding the impact of a company car on my take home (after tax) salary.
    My salary is £42000
    I make a contribution to my pension of 4%.

    The vehicle i am looking at obtaining through the company which will include personal use but not personal fuel (I will be charged the cost of fuel for my private use). Has a P11d value of £26,805 with Diesel Co2 output for 119g/km.

    The calculation I have used is 26805 * 25% = £6701.25. My confusion now is sitting with how to calculate this into my salary. I usually use the tool at : thesalarycalculator[dot]co[dot]uk

    After inputting my Salary, Pension contribution I am coming to the BiK section. Do i enter: 6701.25 or so i enter 1340.25 which as i am a basic rate tax payer 20% of the BiK value?

    Hopefully this makes sense. I'd really appreciate the help!

    -J
Page 1
    • bob_a_builder
    • By bob_a_builder 9th Feb 18, 11:31 AM
    • 1,545 Posts
    • 736 Thanks
    bob_a_builder
    • #2
    • 9th Feb 18, 11:31 AM
    • #2
    • 9th Feb 18, 11:31 AM
    based on your numbers the value £6701.25 will be what appears on your tax coding and you will actually pay 20% of that a year

    Come April the CO2 number will change again
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/532303/TC2b.pdf

    So 119g will become 24% plus the 3% diesel surcharge
    • BoGoF
    • By BoGoF 9th Feb 18, 11:34 AM
    • 2,934 Posts
    • 2,193 Thanks
    BoGoF
    • #3
    • 9th Feb 18, 11:34 AM
    • #3
    • 9th Feb 18, 11:34 AM
    You need to add the BIK value of £6701 onto your salary. This will take you into the 40% bracket next year (you would need to apportion this years BIK value.
    • vundoyo
    • By vundoyo 9th Feb 18, 11:48 AM
    • 3 Posts
    • 0 Thanks
    vundoyo
    • #4
    • 9th Feb 18, 11:48 AM
    • #4
    • 9th Feb 18, 11:48 AM
    Thank you for the responses.

    Just so I am totally clear. As of right now with the above into consideration.

    Would that takehome be: £2,395.91 or £2,518.97. I'm still trying to get my head around this as it is all new to me.
    • Mahsroh
    • By Mahsroh 9th Feb 18, 1:06 PM
    • 302 Posts
    • 262 Thanks
    Mahsroh
    • #5
    • 9th Feb 18, 1:06 PM
    • #5
    • 9th Feb 18, 1:06 PM
    Thank you for the responses.

    Just so I am totally clear. As of right now with the above into consideration.

    Would that takehome be: £2,395.91 or £2,518.97. I'm still trying to get my head around this as it is all new to me.
    Originally posted by vundoyo

    Based on 17/18 Tax Thresholds (and info you've provided)


    Annual salary: £42,000.00
    Deduct Pension £1,680.00
    Taxable salary: £40,320.00
    Benefit in Kind: £6,701.00
    TOTAL TAXABLE £47,021

    11,500 @ 0% Tax
    33,500 @ 20% Tax = £6700
    2,021 @ 40% Tax = £808.40
    Total Tax Per Annum = £7,508.40

    National Insurance = £4,060.00

    Total take home pay for the year £28,751.60 (salary after pension - Tax - NI)

    £2395.96 per month.

    I think! if I've made any errors in my calcs I'm sure others will pick it up. The only area I'm not fully up to speed with is NI calculations - used an online computer to come up with the number above.


    Hope this helps!
    • 00ec25
    • By 00ec25 9th Feb 18, 2:08 PM
    • 5,964 Posts
    • 5,445 Thanks
    00ec25
    • #6
    • 9th Feb 18, 2:08 PM
    • #6
    • 9th Feb 18, 2:08 PM
    I think! if I've made any errors in my calcs I'm sure others will pick it up. The only area I'm not fully up to speed with is NI calculations - used an online computer to come up with the number above.
    Originally posted by Mahsroh
    you are spot on

    i find this calculator to be pretty good as it allows pension to be input as a % or £ and the BIK to be done as an annual , monthly or weekly value

    https://www.thesalarycalculator.co.uk/salary.php
    • vundoyo
    • By vundoyo 9th Feb 18, 3:51 PM
    • 3 Posts
    • 0 Thanks
    vundoyo
    • #7
    • 9th Feb 18, 3:51 PM
    • #7
    • 9th Feb 18, 3:51 PM
    thanks everyone!
    • 00ec25
    • By 00ec25 9th Feb 18, 8:26 PM
    • 5,964 Posts
    • 5,445 Thanks
    00ec25
    • #8
    • 9th Feb 18, 8:26 PM
    • #8
    • 9th Feb 18, 8:26 PM
    The only area I'm not fully up to speed with is NI calculations
    Originally posted by Mahsroh
    NI applies to gross pay, there is no pension offset

    42,000 - (157 x 52 = 8,164) = 33,836 x 12% = 4,060
    • singhini
    • By singhini 10th Feb 18, 6:58 PM
    • 304 Posts
    • 181 Thanks
    singhini
    • #9
    • 10th Feb 18, 6:58 PM
    • #9
    • 10th Feb 18, 6:58 PM
    Based on 17/18 Tax Thresholds (and info you've provided)


    Annual salary: £42,000.00
    Deduct Pension £1,680.00
    Taxable salary: £40,320.00
    Benefit in Kind: £6,701.00
    TOTAL TAXABLE £47,021

    11,500 @ 0% Tax
    33,500 @ 20% Tax = £6700
    2,021 @ 40% Tax = £808.40
    Total Tax Per Annum = £7,508.40

    National Insurance = £4,060.00

    Total take home pay for the year £28,751.60 (salary after pension - Tax - NI)

    £2395.96 per month.

    I think! if I've made any errors in my calcs I'm sure others will pick it up. The only area I'm not fully up to speed with is NI calculations - used an online computer to come up with the number above.


    Hope this helps!
    Originally posted by Mahsroh


    Hi, and thanks for putting up a working example.


    I do have a quick question and was hoping you might be able to help explain.


    Why is the benefit in kind added to the taxable salary? (why does it not reduce the £11,500 tax free allowance?)
    • Mahsroh
    • By Mahsroh 12th Feb 18, 8:05 AM
    • 302 Posts
    • 262 Thanks
    Mahsroh
    Hi, and thanks for putting up a working example.


    I do have a quick question and was hoping you might be able to help explain.


    Why is the benefit in kind added to the taxable salary? (why does it not reduce the £11,500 tax free allowance?)
    Originally posted by singhini

    Good question! I've never fully understood this myself, but ultimately, you end up with the same result! For years now, I've had a company car + other taxable benefits and all year I have a particular tax code which shows a reduction in the tax free allowance, but then when I do my tax return, HMRC calculate it as per my example above.....with the same end result.


    This year (17/18) for the first time ever my employer hasn't adjusted my tax code and instead simply makes an adjustment to my taxable pay (i.e. as per the worked example above). I spoke to HMRC to clarify that - apparently more and more companies are doing it that way now....personally I prefer it, seems a lot simpler to do it that way.
    • sheramber
    • By sheramber 12th Feb 18, 12:31 PM
    • 4,263 Posts
    • 3,219 Thanks
    sheramber
    Benefit in kind is additional income and part of your total income calculation.
    • martinsurrey
    • By martinsurrey 12th Feb 18, 4:46 PM
    • 3,319 Posts
    • 4,048 Thanks
    martinsurrey
    NI applies to gross pay, there is no pension offset
    Originally posted by 00ec25
    only true if its not a salary sacrifice pension scheme, if it is there is a pension offset.
    • singhini
    • By singhini 12th Feb 18, 10:43 PM
    • 304 Posts
    • 181 Thanks
    singhini
    Good question! I've never fully understood this myself, but ultimately, you end up with the same result! For years now, I've had a company car + other taxable benefits and all year I have a particular tax code which shows a reduction in the tax free allowance, but then when I do my tax return, HMRC calculate it as per my example above.....with the same end result.


    This year (17/18) for the first time ever my employer hasn't adjusted my tax code and instead simply makes an adjustment to my taxable pay (i.e. as per the worked example above). I spoke to HMRC to clarify that - apparently more and more companies are doing it that way now....personally I prefer it, seems a lot simpler to do it that way.
    Originally posted by Mahsroh


    Thank-you for responding (and to Sheramber). This is exactly my experience with HMRC hence why I asked the question (on my PAYE coding my company car reduces my tax free allowance, yet on the end of year summary from HMRC they record the car as a form of income, just as you mentioned).


    And they say taxation shouldn't be taxing.............. yeah right!
    • dori2o
    • By dori2o 12th Feb 18, 11:26 PM
    • 7,455 Posts
    • 12,404 Thanks
    dori2o
    Thank-you for responding (and to Sheramber). This is exactly my experience with HMRC hence why I asked the question (on my PAYE coding my company car reduces my tax free allowance, yet on the end of year summary from HMRC they record the car as a form of income, just as you mentioned).


    And they say taxation shouldn't be taxing.............. yeah right!
    Originally posted by singhini
    It is a form of income, but where the employer does not deal with the tax of the company car through payroll (by adding an amount to your pay) it then has to be taxed another way. The way to do that is by including it in your tax code as a deduction from the total number of allowances given.

    This has the same effect as simply adding the amount to your salary as it simply makes an additional amount of the pay from employment/pension (equivalent to the BIK value) available to tax.

    When you receive a tax calculation it always shows the value of all BIK (benefit(s) in kind) as an addition to your income, and always shows the amount personal allowance you are entitled to based on your income in full.

    Your tax code, the actual physical number given to you, is simply a method of telling the employer how much tax to deduct from your pay.

    Unless you earn over £100k you dont lose any personal allowance. The deduction of the car benefit is not a reduction of the personal allowance. Its merely part of the calculation used to calculate the tax code.
    To equate judgement and wisdom with occupation is at best . . . insulting.
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