Company car tax

sunrise27_2

Ok here's what I thought happened maybe I'm wrong ?
Figures are all hypothetical ish
Say Hubby earns £45000 once you take his personal allowance off that brings it down to £33500 making him a basic tax payer ?
But then ( and this is where we got confused ) the tax office told us that by having a company car ( benefit in kind of around £9000 ) that just pushed him into the higher tax bracket , it wasn't much over though ?

00ec25

sunrise27 wrote: »

Ok here's what I thought happened maybe I'm wrong ?
Figures are all hypothetical ish
Say Hubby earns £45000 once you take his personal allowance off that brings it down to £33500 making him a basic tax payer ?
But then ( and this is where we got confused ) the tax office told us that by having a company car ( benefit in kind of around £9000 ) that just pushed him into the higher tax bracket , it wasn't much over though ?

for the current tax year (17/18) the personal allowance is £11,500. That is how much he can earn without paying tax. the NEXT £33,500 is taxed at 20% and then you cross into the 40% (higher) rate rate at 11.5+33.5 = £45,000

a benefit in kind, such as a car, is added to his earnings to get to his taxable income, so you say he earns 45k to start with, plus has 9k of "car", so his total income is 54k of which 11.5 is tax free (personal allowance) 33.5 is taxed at 20% and 9k is taxed at the higher rate

sunrise27 wrote: »

I think the company are pushing for him to go for a personal allowance , they will pay for the car tax and insurance ( I think )
He has been looking at personal leases not business
He is a higher rate tax payer but I think the car hasn't helped with that ( I think that has just pushed him into the higher tax bracket ) so by going for a personal allowance he should go back to being a basic tax payer.
And he will get a mileage allowance
I think at the moment he gets something like 14 p a mile that will go up to 43 p a mile

if "they" make such payments against a car he owns personally, those payments are taxable benefits and will be added to his income just that same as the "9k" car currently is

if "they" pay 43p per mile and he claims only his business mileage that payment will be tax free. But that pence per mile is supposed to cover all the costs of owning a private car used for business purposes so he cannot expect to also get "car tax and insurance" on top of that rate as that would be a taxable benefit

sunrise27_2

So has having the car pushed him into the higher tax bracket ? The tax office told us that it has ?

00ec25

sunrise27 wrote: »

So has having the car pushed him into the higher tax bracket ? The tax office told us that it has ?

what do you not understand about my previous post?

11.5+33.5 = 45k
have total income >45 and he is a higher rate

sunrise27_2

I have to use hypothetical figures here as we don't know what allowance he will be getting but for example if he gets £300 a month then that works out £3600 a year which is obviously a lot less than £9000 so would that not make us better off ?

sunrise27_2

I just wanted confirmation that I was right that the car had pushed him into the higher tax bracket, I didn't say I didn't understand your post, choccie lover said higher up that the car wouldn't have done that ? So was just slightly confused , I'm not an accountant and find this tax business hard work

00ec25

sunrise27 wrote: »

I have to use hypothetical figures here as we don't know what allowance he will be getting but for example if he gets £300 a month then that works out £3600 a year which is obviously a lot less than £9000 so would that not make us better off ?

how much is his gross salary now?

as pointed out above by others, if he is already a higher rate taxpayer because of the size of his salary, then whether the £300 allowance is "better" than a fully expensed company car is simply a case of guessing how much it will cost him to run his own car v paying nothing for the company car except a bit of tax

if the company pays towards any costs of his car apart from the pence per mile rate then that is a benefit in kind and will be added to his salary so it won't be £300 v company car any more , it will be £300 + benefits v company car

without proper figures you are just going round in circles

BoGoF

And remember that employee NIC will be chargeable on the car allowance.......it isnt on the company car benefit.

You will also need to check with the employer if the 43p a mile is payable on all business mileage or just first x amount. HMRC rules are that first 10,000 miles can be paid at 45p a mile then 25p thereafter. If employer pays more than this then another taxable BIK.

[Deleted User]

BoGoF wrote: »

And remember that employee NIC will be chargeable on the car allowance.......it isnt on the company car benefit.

.

albeit only at 2%.

[Deleted User]

sunrise27 wrote: »

I just wanted confirmation that I was right that the car had pushed him into the higher tax bracket, I didn't say I didn't understand your post, choccie lover said higher up that the car wouldn't have done that ? So was just slightly confused , I'm not an accountant and find this tax business hard work

So, with reference to my previous post, the car benefit charge is £9000, the tax on which is £3600. You will not have to insure, tax, repair or take the depreciation 'hit' on the car. You will not pay for business mileage and can claim mileage rate at 14p or thereabouts.

With a car allowance of £3600 the net annual pay increase will be £2088. You will have to insure, tax and repair the car and take the depreciation 'hit' . You will be able to claim a higher rate for business mileage.

Those, in very basic terms, are the sums.