Can I avoid / put off the 40% tax band (Company Car)

sniperpenguin

Hi,

Im looking at a potential job offer, however the package mentioned is "Upwards of 30K plus car allowance"

Now, I've done a little digging with this and was told by the company (and I quote) "Let us know what you want, and we'll pick it up on a lease".... Im guessing a diesel Audi R8 is excluded :rotfl:

My question is this - If I negotiate a package above £32,010 (the limit of the 20% band) and I get a company car, Im worse off as I've drifted into the 40% band - Is there are way to avoid this through pension contributions etc, or do I have the wrong end of the stick?

Any advice is greatly appreciated!:D

InsideInsurance

sniperpenguin wrote: »

Im guessing a diesel Audi R8 is excluded :rotfl:

Yes, because there is no Diesel R8

Any

The £32010 is the 20% tax rate band, what about your personal allowance??

Usually people don't drift into 40% tax band unless their earnings and benefits reach £42k...

Also you only pay 40% on anything over...

So you would pay 20% on the £42k and then 40% on anything over...
(remember this is on the salary and value of benefits combined..you dn't need to have £42k on actual payslip, it can be £32k on payslip and £10k worth of car benefit)

ceh209

Personal allowance is £9,440, THEN there's the basic rate band of £32,010, so unless you're getting above £41,450 (salary + company car 'equivalent') then there's nothing to worry about.

Plus if you did go over that, you only pay 40% on the bit that's over, not the whole lot so it's not the end of the world.

Does that help?

sniperpenguin

Thanks for the replies guys

So am I right in thinking that its £41,450, not £32,010 that needs to be your "gross" salary before you hit 40%

Im aware that benefits and deductions can affect it either way, it was just the fact that the car calculations were based on your Income Tax band regardless (so it would be 20% or 40% beforehand), which didnt seem to fit the whole "only 40% of whats above 32,010" explanations that normally go hand-in-hand with PAYE

Any

sniperpenguin wrote: »

Thanks for the replies guys

So am I right in thinking that its £41,450, not £32,010 that needs to be your "gross" salary before you hit 40%

Im aware that benefits and deductions can affect it either way, it was just the fact that the car calculations were based on your Income Tax band regardless (so it would be 20% or 40% beforehand), which didnt seem to fit the whole "only 40% of whats above 32,010" explanations that normally go hand-in-hand with PAYE

It is used for simplicity. It would need a lot of writing if you had to explain "if 75% of pay go under 40% tax" etc..

Yes, your total pay and benefits can add up to £41450 before you hit the 40% band in 2013/14.

heretolearn_2

In any case, you are never worse off moving up to the 40% band. It means you are earning more and bringing more home. Better to be in that band and pay 40% tax on the part of those earnings over the threshold amount, than be in the 20% band and have zero earnings over the threshold amount.I don't know why people get so obsessed about wanting to earn less!

The 40% doesn't become payable on the whole of your earnings. If it did, no one would ever go for a promotion...

Let's pretend the threshold is £20,000 and there's no personal allowance, to keep it simple.

Would you rather earn £19,999 and keep 80% of that (take home £15,999), or earn £25,000 and keep 80% of the first £20,000 (£16000) and 60% of the remaining £5000 (£3000) total take home £19000?