Confused by company car tax

MonMan

I'm thinking of going on the company car scheme at work but not sute about a few things....
At the moment i do about 25000 business miles a year and receive a £6K car allowance and 11p per mile for fuel, At the moment the fuel allowance isn't covering my fuel. My salary is £36K so most of the car allowance brings me into the 40% rate.
If i take a company car, is the car tax calculated on my basic salary of £36K or on £36K + the benefit of the car?
If you suddenly got a pay rise which brought you £1 into the 40% tax band, would that double your car tax immediately?
Hope all thats clear!
Thanks.

Elaine_Wilson

Your basic salary plus the car allowance is only £42,000. Higher rate does not apply until your taxable income is over £37,400. Since you have a personal allowance of £6,475 you can earn £43,875 before higher rate kicks in.

Even then, the higher rate only applies to the income above that figure.

At the moment you are receiving a car allowance which I assume is taxed and 11p per mile for business miles. I hope you are claiming tax relief for the business miles not covered by that 11p. You can claim 10,000 miles at 40p plus 15,000 miles at 25p which equals £7,750. You have received 25,000 miles at 11p = £2,750 so you can claim tax relief on the difference of £5,000. At the basic rate of 20% this means another £1,000 in your pocket.

If you are provided with a company car the benefit is calculated on the list price of the car at a rate determined by the carbon dioxide emissions. It has nothing to do with the level of your salary.

MonMan

Are you sure about the levels for the 20%, 40% split. I thought you paid no tax on the first £6475, 20% on £6476-£37,400 and 40% over that?
The car I'm looking at has a list price of £24,500 and a 20% taxable rate. The benifit is calculated on that but the tax I pay on that benefit is based on whether I am a 20 or 40% tax payer. Thats what I'm trying to work out.....

Basically, i will have a benefit of £4900. Do i pay 20% or 40% tax on that as my salary and benefit push me over £37,400?

Thanks

NiceGuyEddie_2

MonMan, for income tax the rate bands are based on taxable income, not total income so the poster above is right.

The first £6,475 of your income is tax-free as it's covered by your personal allowance. The next £37,400 falls in the basic rate band so you don't hit the higher rate band of 40% until you pass the PA and the BRB, ie £43,875.

Assuming you just have the basic salary of £36,000 and a car benefit of £4,900 you are still in the BRB and so all of your benefit will be taxed at 20%