leased car

westentertainer7

hello and sorry if posted in wrong section..i had a leased car that i paid for out of my wages from September 2013 until April 2014 when i had the shock of my life from the inland revenue ,they had adjusted my code from 1000 to 200 i contacted them and they said it was for the company car ,i have had to pay back what i owed them from sep to april [i handed the car back in may 2014 ,this does seem like a lot of money to pay for a car that i was already paying nearly 400 pounds a month for ,is this right or do you think they thought i had a company car ,,,advise please if you dont mind before i contact them

VSynth

Was it a salary sacrifice car where you sacrifice some of your wage before tax and so save tax and NI contributions?

There is a BIK (benefit in kind) tax to be paid for a salary sacrifice car and this is collected by lowering your personal allowance so that you pay more tax.

westentertainer7

yes salary sacrifice

Ectophile

Technically, you didn't pay anything for the car. You informed your employer that you didn't mind taking a pay cut, and your employer leased a car for you in return.

Salary sacrifice is often a good (and legal) tax avoidance scheme, but it can have unexpected consequences.

marlot

You chose to stop paying tax and NI on part of your salary, with that money being used to fund a car.

Quite rightly, there is a tax on the car. Otherwise everybody would be doing something similar!

The question for people in this situation is whether they are better off paying tax on the earnings (and leasing the car themselves if they want one), or paying the BIK on the car.

My employer mostly offers after-tax benefits, so the tax implications are very clear.

http://www.hitachicapitalvehiclesolutions.co.uk/car-solutions/funding-methods/salary-sacrifice/

westentertainer7

Ectophile wrote: »

Technically, you didn't pay anything for the car. You informed your employer that you didn't mind taking a pay cut, and your employer leased a car for you in return.

Salary sacrifice is often a good (and legal) tax avoidance scheme, but it can have unexpected consequences.

i didnt pay anything for the car ! i hade 50 pounds in my benifits plus scheme the rest i paid out of my wages

Ectophile

westentertainer7 wrote: »

i didnt pay anything for the car ! i hade 50 pounds in my benifits plus scheme the rest i paid out of my wages

It sounds pedantic, but the way in which salary sacrifice works is important for tax reasons. That's the only reason employers do it.

When you signed up for a salary sacrifice scheme, you should have signed a form in which you agreed to take a pay cut. This will affect the salary you get on your pay slip, and will also be reflected in the information passed to Revenue & Customs. Most importantly for the employer, the amount of employer's National Insurance they have to pay is based on your salary, which means they have to pay less NI. This means they can afford to be a bit more generous in the perks they offer under a salary sacrifice scheme.

In return for your generosity, your employer agreed to lease you a car at their expense. The lease was paid by the employer, and so is a taxable benefit.

VSynth

what exactly has your tax code gone from and to?

1000 to 200 doesn't make sense.

What was the value of the car and what fuel type?

westentertainer7

sorry 500 from 1055 its gone back to 1055 now because i paid back what i owed

hembop

I have a dilemma.

I have been offered a job that is 50 miles each way (100 miles per day) and I am currently looking at the pros and cons of leasing a car versus using my 2006 petrol c-max 1.6 at 71,000 mileage. My car seems to be running ok but needs about £300 pounds of repairs needed. My husbands car is a Peugeot 308 petrol 1.4 with around 45,000 on the clock. Should i use his instead? My husband works for the NHS and seems to get a good leasing package called Salary Max but I am concerned about the tax implications surrounding the benefit in kind. some of the threads i have read have scared me a little...should I just take a gamble and stick with my car? or be more cautious and go for a lease hire.

Thank you