Will I get taxed at 40% on company car?

craigmmorq4

Hello All

I have a salary at the moment of 30k basic, with also 4K on call allowance per year plus I have a company car which cash value of benefit in kind is worth 5.2k.

I am hopefully getting a 3k payrise so I'm wondering if I will have to start paying 40% tax on my company car?

Any advice or help would be appreciated


Craig

Dazed_and_confused

That lot comes to just over 42k so if you have no other taxable income then no you wouldn't pay 40% tax in 2017:18.

Assuming you don't get the 3k payrise between now and the end of the current tax then the same applies for this year which is about to end

craigmmorq4

Thanks for that.

What if the 3k rise turned into a 5k rise

booksurr

craigmmorq4 wrote: »

Thanks for that.

What if the 3k rise turned into a 5k rise

the tax thresholds are very easy to understand

everyone gets a tax free personal allowance (£11,000 for 16/17)

the NEXT £32,000 is taxed at the basic rate 20%

the NEXT £118,000 is taxed at the higher rate 40% (although there are complications with the personal allowance once you get above 100k)

anything over £150,000 pa is taxed at the additional rate 45%

do the maths ...
higher rate tax starts at 11 + 32 = ?
your taxable income comprises salary 30k + on call 4k + car BIK 5.2k = ?

https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2016-17/tax-and-tax-credit-rates-and-thresholds-for-2016-17

getmore4less

(30+4+5.2-11)/32= 88%

add a 3k pay rise and that's 97.5% 16/17

with the 5k rise and 17/18 £11.5/£33,500 97.6%

so just under still.

once you hit 40% with a full personal allowance the NI drops to 2%(if NI limits have changed n line) so the extra is only 10% but if your PA is reduced due to benefit in kind you can get hit with a 40%+12% on some income rather than 40%+2%

don't forget any pension contributions.

Darksparkle

getmore4less wrote: »

(30+4+5.2-11)/32= 88%

add a 3k pay rise and that's 97.5% 16/17

with the 5k rise and 17/18 £11.5/£33,500 97.6%

so just under still.

once you hit 40% with a full personal allowance the NI drops to 2%(if NI limits have changed n line) so the extra is only 10% but if your PA is reduced due to benefit in kind you can get hit with a 40%+12% on some income rather than 40%+2%

don't forget any pension contributions.

Keep in mind though, you don't pay NI on your company car, only your employer does.

martinsurrey

booksurr wrote: »

do the maths ...
higher rate tax starts at 11 + 32 = ?
your taxable income comprises salary 30k + on call 4k + car BIK 5.2k less PA 11k = ?

you are barely 2/3rds of the way towards becoming a higher rate taxpayer

Went a bit wrong at the end there book.

You are comparing OPs income LESS personal allowance to tax bands INCLUDING personal allowance, remove from both or neither.

OP's total income subject to tax is 30+4+5.2=39.2
40% taxable starts at £43k subject to tax, so 91.2% of the way. there

with a £3k payrise its 98% there.

TempUserName123

Just to add, it might be worthwhile paying into a private pension, in which case this will effectively increase your basic rate band, meaning that you won't be charged at higher rate.

That's if of course, your income does eventually gets pushed into the higher rate tax bracket

craigmmorq4

Thanks. I already pay 5% of my salary into a company pension in form of salary sacrifice

Dazed_and_confused

Rules are different if you live in Scotland and you would be perilously close to paying (a little bit of) 40% tax in the forthcoming tax year.

TempUserName123

I meant a personal pension, rather..