New job - salary, benefits and tax

James_Blonde

Alarae wrote: »

From a quick read, I'm guessing that you are under the belief that your benefits package is part of your salary, and you then pay for those benefits out of those portion.

From what I gather, that's wrong. Your salary is 40k. Your employer is providing you with 12k of extras which they are paying for- and then you pay the BIK tax.

Thanks Alarae, this is exactly the sort of info I was after, and I think matches what I thought was the case, but that begs some more questions. If it was all salary, this would be so much easier, but because it isn't, either it is more complicated, or i'm over complicating it.

If my salary is £40K, then that puts me in the 20% tax bracket. So why is my BIK being calculated at the 40% bracket? I know that my salary + benefits package would take me into the 40% bracket, but my salary + benefits package - tax deductible benefits (so £40K + £12K - £13.5K) would take me back into the 20% tax band anyway. Or is the fact my tax code has changed pushed me back into the 40% band?

Also, what's my gross (pre tax) income? Is it £40K or £52K? Ultimately if I try to plug all of this into a tax calculator, it just doesn't come out with an answer that matches what I get.

You don't actually pay for the car payments. Your employer is, hence why it is a 'free' car in the eyes of hmrc. It would be different if you were actually paid 52k and then the car payments were deducted, as then there would be no BIK because you would have made good the payments the employer would make on your behalf.

That makes sense. I guess because it's my decision as to how I spend the benefit pot (benefits or salary) I just assumed it would be treated as though it was a deduction from salary on the basis that I could take it as salary if I wanted to, even though I kind of know it's not really salary - that makes it more confusing (at least to me!) than it probably is!