New to Company Car Tax

martinsurrey

00ec25 wrote: »

NI applies to gross pay, there is no pension offset

only true if its not a salary sacrifice pension scheme, if it is there is a pension offset.

singhini

Mahsroh wrote: »

Good question! I've never fully understood this myself, but ultimately, you end up with the same result! For years now, I've had a company car + other taxable benefits and all year I have a particular tax code which shows a reduction in the tax free allowance, but then when I do my tax return, HMRC calculate it as per my example above.....with the same end result.


This year (17/18) for the first time ever my employer hasn't adjusted my tax code and instead simply makes an adjustment to my taxable pay (i.e. as per the worked example above). I spoke to HMRC to clarify that - apparently more and more companies are doing it that way now....personally I prefer it, seems a lot simpler to do it that way.

Thank-you for responding (and to Sheramber). This is exactly my experience with HMRC hence why I asked the question (on my PAYE coding my company car reduces my tax free allowance, yet on the end of year summary from HMRC they record the car as a form of income, just as you mentioned).


And they say taxation shouldn't be taxing.............. yeah right!

dori2o

singhini wrote: »

Thank-you for responding (and to Sheramber). This is exactly my experience with HMRC hence why I asked the question (on my PAYE coding my company car reduces my tax free allowance, yet on the end of year summary from HMRC they record the car as a form of income, just as you mentioned).


And they say taxation shouldn't be taxing.............. yeah right!

It is a form of income, but where the employer does not deal with the tax of the company car through payroll (by adding an amount to your pay) it then has to be taxed another way. The way to do that is by including it in your tax code as a deduction from the total number of allowances given.

This has the same effect as simply adding the amount to your salary as it simply makes an additional amount of the pay from employment/pension (equivalent to the BIK value) available to tax.

When you receive a tax calculation it always shows the value of all BIK (benefit(s) in kind) as an addition to your income, and always shows the amount personal allowance you are entitled to based on your income in full.

Your tax code, the actual physical number given to you, is simply a method of telling the employer how much tax to deduct from your pay.

Unless you earn over £100k you dont lose any personal allowance. The deduction of the car benefit is not a reduction of the personal allowance. Its merely part of the calculation used to calculate the tax code.