Just Getting Out - Tax help please

webby962

OK, I have no real idea about tax and stuff. Shock I know, but the pay office has looked after all that for the last 24 years since I was 16.

I'm due out in December, and have landed a job with a company car.
I have looked at 3 online tax calculators and they all give different results to some degree or other.
OK, using notional numbers, can someone help me understand all the outgoings!

Lets assume my new income will be say 45k, and the car has a BIK (Benifit In Kind) value of about 4k. I will also have my fully comuted pension of say 10k.

(I used the comcar calculator to work out the BIK value)

Does this mean I have an income of 59k? Will I still have my 647L tax code? If not how do I know what that will be? How does this change my NI contributions?

Basically, can anyone help explain the tax system for a thick soldier, and point me in the direction of a calculator that I can see what my income is going to be, so I can plan accordingly?
(I have used listentotaxman but again I'm not sure where to put my BIK and pension data).

Thanks in advance...

[Deleted User]

Hi Webby

I am by no means a tax expert, but... this may help some.

This years personal allowance (earnings before you have to pay tax is £6475), which is where you get your tax code 647L from.

Therefore, based on your salary and BIK assumptions below, you would be receiving a BIK of £4K, so your tax code would change to 247L. If you enter that tax code into listentotaxman then that should give you your salary monthly, annually etc after tax/NI etc.

So, for a gross salary of £45K, with £4K BIK (tax code 247L), you would be looking at monthly income after tax/NI (net) of £2605.17.

As for the pension, I have no idea whether this is considered taxable income, you would need to look into it.

Hope that was sort of helpful, as I said, I am not an expert in these things.

webby962

Many thanks.

I know the pension is taxable, and at 40%, so I suppose all I need to do is add the taxed pension monthly amount onto your figure.

Thanks for the clarity. The whole taxed thing looked so daunting...

:T

[Deleted User]

You're welcome. If you know that the pension is taxed, then yes, add it to the total gross income I guess.

Be warned the tax office are woefully behind and very slow, so as soon as you have been paid your first salary - check your payslip and the tax code on it (it will probably be wrong) - so telephone them and tell them your new income and any benefits in kind and ask them to issue you (and your employer) a correct/new coding notice.

If you don't and your tax code is wrong, then you will owe them money when your employer sends the a copy of your P11D (income and benefits) some time after April 2011.

You should get a tax coding notice at the beginning of each tax year March/April time, always check it and call them to tell them of any changes - they will usually base it on the previous years figures, so if you join your new company in December for instance, you will only pay tax on the benefit actually received (ie, December through March), not the full year, so your next coding notice will probably assume the same amount. I hope that makes sense!

webby962

Thanks very much. I'm glad I asked now rather than being to embarrassed to ask! This looks like it could save me some nasty supprises next April/May!!

samm1551

Webby,

Check whether the commutation is taxable. I have a feeling that it isn't. Also annually you may have to do a self assessment (my Dad has to) because although you will initially pay tax @ 40% on your pension you may not owe that (if that makes sense). Dad gets a lump sum back from the tax man almost every year. He did say that they were going to change that but I am not sure if he meant from April 2010 or April 2011.

There is info on Armynet in relation to pensions and tax status but I can't link it in to you.

webby962

Thanks Samm1551.
I do know the Lump sum is tax free, hence why I did a full commute and took the reduced pension. Armynet does have usefull info, but most of it is about the one aspect of the tax, e.i. the pension. My problem was understanding the whole so to speak; wage, BIK, and Pension, not to mention two tax offices!!!!