salary sacrifice car

deeparker

I have a salary sacrifice car. This means that i pay £310 from my salary before i pay tax. Since i started paying this my tax code has gone down from 810 to 540, this is due to the fact that my employer when completing my P11D form state that the 310 is a benefit. I pay this £310 and therefore surely this should not be regarded as a benefit. I do not receive any monetary benefit from my employer towards the car it is payed for completely from my salary. The only benefit i do get is a reduction in tax payments each month because the payment is taken from my wage before tax.
Many of my colleagues have had their tax code reversed to their original but i have had no success, the tax office state that my car is classed as a company car. What is my position?

hcb42

if you really do have the £310 taken away from your salary, before you pay tax, then it would follow that this is a taxable benefit and would reduce the code.

A rather log winded way of getting to the same result.

flashg67

I'm not an expert, but suspect you may be right - I'd speak to your HR/payroll, or even the (lease?) company that supplied the car for clarification

grey_gym_sock

i don't quite follow the figures, but i understand that the basic idea that a salary sacrifice car is treated as a taxable benefit, based on the P11d value as for company cars generally, is correct.

it is a benefit in the sense that it is something your employer is providing in exchange for doing your job (as an alternative to part of your salary).

you gain by paying for the car from your pre-tax and per-NI salary, but lose on the BIK tax. were the the costs vs benefits made clear up front?

deeparker

I was lead to believe that i would make a saving in tax as i would pay less because the fee for the car was taken from my salary pre-tax, but looking at it now it appears i am not making any savings because what i have saved is then taken away because my tax code has gone down. Is that right? Also you say my employer provides the car but i pay for it in the £310 salary sacrifice payment from my pay each month. Nothing is payed by my employer.

mrsbrayne

By replacing part of your gross cash salary for a benefit, although you still pay the income tax (via your reduced PAYE coding notice), you have still saved on National Insurance.

You are getting a benefit as you are being provided with a car, for you to be "paying for it" you would need to be repaying your employer from taxed income (i.e. from your net wages).

jamesd

deeparker wrote: »

I do not receive any monetary benefit from my employer towards the car it is payed for completely from my salary.

Of course you do, you get the use of the car for £310 a month and are better off in money terms by the saved NI on £310 a month and possibly part of the saved employer NI if they share that.

deeparker wrote: »

Many of my colleagues have had their tax code reversed to their original

That's worrying. It seems likely that they are engaged in tax evasion because that is not normally correct handling for a company care paid for by salary sacrifice.

The P11D is correctly telling HMRC that you're getting a taxable benefit of £310 a month and HMRC have correctly reduced your tax code to allow for that, so you pay the proper amount of income tax on that part of the remuneration you're receiving from your employer.

There are some benefits that you can get by salary sacrifice that don't count for income tax but a company car isn't one of them.

grey_gym_sock

to clarify:

it is correct that on a taxable benefit, such as a car, you pay income tax but not employee NI.

however, the amount of income tax could be higher or lower than what you'd have paid if you'd taken your full salary instead. because the value of taxable benefit is calculated based on the P11d value of the car, not based on the amount of pre-tax salary used to pay for the car. if the car has quite low CO2 emissions, you are likely to be paying less income tax.

Estwing

What if the £310 included the BIK, surely this would mean the tax code wouldn't reduce? Not sure if this applies to the op mind.