Understanding Taxable Benefits- Medical Cover

Fletchasketch

Hello,


My company has recently started offering medical cover as a taxable benefit. The cost to the company is 23.80 per month and my understanding is that we just pay tax on this.


Does that mean that as a higher rate tax payer this benefit will cost me 9.52 per month?


I'm not clear on how it will be paid, does it just mean I pay more tax or am I expected to pay 9.52 x12 at the end of the tax year?


Thanks in advance for your help

TheCyclingProgrammer

The value of the benefit should be reported on your P11d assuming you earn over £8500. Depending on the value of the benefit, HMRC should be able to recover the tax due on this by adjusting your tax code.

Fletchasketch

Hmm, I was told there would be some money to pay, just not a lot. Any further opinions gratefully received.

TheCyclingProgrammer

Fletchasketch wrote: »

Hmm, I was told there would be some money to pay, just not a lot. Any further opinions gratefully received.

There might be. I'm not positive but a change in your tax code when HMRC receive your P11d next July might only cover the tax going forward so you might receive a P800 (I think) calculation saying you owe tax.

It probably wouldn't hurt to put aside a small amount each month to cover a possible bill.

purdyoaten

blondebubbles wrote: »

Your tax code will be adjusted to take it into account.

You wouldn't pay it directly to HMRC, unless you are on SA which then you can choose to.

It would. However, the total benefit for this tax year (2014/15) will be returned by 6th July 2015 and, optimistically, processed by HMRC by September 2015. By this stage the op will have underpaid nine months of 2014/15 and six of 2015/16. HMRC will alter the code for 2015/16 so that it is correct from that point. The 2014/15 underpayment (assessed through a P800 calculation) and the 2015/16 potential underpayment will be collected in 2016/17 tax year - underpayments calculated in a tax year cannot be collected in the same tax year.

I think that I would contact HMRC now to inform them of the benefit - saves hassle in the long run.

Fletchasketch

So effectively, there is no way to know what the net cost is? Seems a bit crazy to me!

purdyoaten

Fletchasketch wrote: »

So effectively, there is no way to know what the net cost is? Seems a bit crazy to me!

No - you were correct to start with in your first post - £9.52 per month. I just pointed out that is is accruing each month until HMRC finally get around to adjusting your code number to collect this extra amount.

zygurat789

TheCyclingProgrammer wrote: »

The value of the benefit should be reported on your P11d assuming you earn over £8500. Depending on the value of the benefit, HMRC should be able to recover the tax due on this by adjusting your tax code.

The income limit is inclusive of the benefit so earnings would be greater than £8215. Not a big difference on this example but when it is a car the benefit is much larger so the earnins amount would have to be lower.

lisyloo

If you know for sure that your tax rate is 40% then the tax is as you stated.
The question is how is it collected.
If you did nothing then HMRC won't know about it until after the end of the tax year, then they'll change your tax code so that next tax year you'll pay the amount you for 2014/2015 and the ongoing cost (so in 2015/2016 you'll have to pay 2 years worth).

As it's a relatively small amount then you could just let things take their course.
However if you like to keep on top of things (and nothing wrong with that) then you could phone HMRC and ask them to adjust you tax code now, then you'll start paying more tax during 2014/2015 and you won't get behind.