Company car tax on tax free income

njmclare

Hi There,
I dont know if anyone has experience in the following but just looking for a bit of advice really before I phone HMRC.

I'm a research student and get paid a tax-free amount from the university amounting a yearly wage broken down into monthly payments but the company who the scheme is linked with have offered me a company car.

It normally works that a company car, or benefit in kind, has the effect of reducing my tax code, but my only income will be tax free.

Is this a loophole, or is there another way the HMRC will get me to pay for the company car?

Cheers,

Nick.

cfnc

Your tax free amount will be reduced by the amount your company car tax amount, so you may end up paying tax on your income.

Kirsty

168hourweek

You will be taxed or have your tax code reduced by the benefit in kind

System

I'm not sure that tax will have to be paid.

Yes the tax code will be reduced because of the car but as the research grant is tax-free then the OP can still have another income up to the new reduced tax code without having to pay any tax. If the new tax limit is exceeded by other income then normal tax rules apply

My take anyway.

silvercar

You can end up with a negative tax code if the benefits that are used to reduce your code exceed your tax allowance. The revenue used to call them "K" codes, I'm not sure if they still do.

It also used to be that you needed to earn over £8,500 to be taxed on a benefit in kind eg company car. Not sure if that has changed.

antrobus

silvercar wrote: »

It also used to be that you needed to earn over £8,500 to be taxed on a benefit in kind eg company car. Not sure if that has changed.

The £8,500 limit is still in place.

njmclare

Thanks for the comments. I'll update with the official line from the tax office when I get round to it.