Help with PAYE and tax code

darrenmc

Hi guys, I'm almost at my wits end trying to figure out why I'm being taxed so much and if it's right.
I am thinking of employing a specialist tax consultant but thought I would ask here first.
Basically I get paid £40000 a year and have a company car for which I pay my own mileage.
P45D for the car is £25000 and banding for C02 is 33%
I live and work in Scotland

From what I have read so far I muliply the P45D value by the C02 banding, equaling £8250 for BIK.
Does this amount of BIK come straight off my Personal Allowance or do I multiply it by my basic tax rate of 21% and then take it off?
I have also been onto my online tax account and found that I am paying tax at 41% on anything over £31000 which I find really strange.

ANy advice or help would be much appreciated.

thanks

darren

molerat

The BIK reduces your PAYE allowance so you are effectively taxed on an extra £8250. 41% tax is deducted on income of £31580 above your personal allowance, what tax code is being used ?

darrenmc

Current code is S383L

sheramber

Scottish Tax Rates

https://www.gov.uk/scottish-rate-income-tax

molerat

You will have paid 41% on income in excess of £35419 or £2951 in April, what is on your pay slip ?

Dazed_and_confused

From what I have read so far I muliply the P45D value by the C02 banding, equaling £8250 for BIK.
Does this amount of BIK come straight off my Personal Allowance or do I multiply it by my basic tax rate of 21% and then take it off?
I have also been onto my online tax account and found that I am paying tax at 41% on anything over £31000 which I find really strange.

I presume you mean P11D not P45D.

The only thing which can reduce your Personal Allowance is having "adjusted net income" in excess of £100,000.

But Car Benefit is an element used in the make up of your tax code and from what you have posted so far yours could be expected to be S360L (Personal Allowance £11850 less Car Benefit £8250).

As your tax code is S383L you need to provide the make up of the code so we can see what is different.

"Salary" is irrelevant for tax purposes, what counts is your taxable pay. This is often less than salary, commonly as a result of pension contributions. Your payslip should show a taxable pay figure for the month and ideally a cumulative amount for the tax year to date.

Assuming your taxable pay is similar to the £40,000 salary then the tax which will ultimately be due on the company car is highly unlikely to be a straight £8,250 x 21% or £8,250 x 41%. Chances are some will be taxed at 21% and some at 41%.

Not sure exactly what the £31,000 figure you refer to relates to but it must be after taking into account the Personal Allowance. The Scottish tax rates for wages, company benefits and the like are

Taxable income Band Tax rate
£11,851 to £13,850 Starter rate 19%
£13,851 to £24,000 Basic rate 20%
£24,001 to £43,430 Intermediate rate 21%
£43,431 to £150,000 Higher rate 41%
Over £150,000 Top rate 46%

There are 9 other rates and bands for different types of income such as savings interest or dividends.

darrenmc

My tax code for April was SK364. HMRC had me down as having private fuel benefit even though I pay for my private mileage. I have that sorted now thankfully as they took just shy of £1000 in tax for april.

Dazed_and_confused

If the revised tax code was issued on a "cumulative" basis then you should get a significant tax adjustment in your favour in your May wage (providing your employer has go their tax code notification in time for the May wage run).

But it would be useful to know the make up of your new S383L tax code.

darrenmc

This is all I can find in my tax account
S Your income or pension is taxed using the rates in Scotland.

383 Your tax-free income for this employer is £3,830.

L You are entitled to the basic tax-free Personal Allowance.

My personal allowance is shown as £11850
Minus £8014 for car benefit.

The 31000 figure, or more accurately the 31580 figure comes from adding up the first 3 bands . anything after that is getting taxed at 41%
Amount (£) Band Tax rate Tax due (£)
2,000 Income starter rate 19% 380.00
10,150 Income basic rate 20% 2,030.00
19,430 Income intermediate rate 21% 4,080.30
3,896 Income higher rate 41% 1,597.36
Total tax estimate 8,087.66

Plus I pay 68.24/ month for pension, I assume this comes off before they apply the tax calculation?

xylophone

Plus I pay 68.24/ month for pension, I assume this comes off



before they apply the tax calculation?

Are your contributions on a "relief at source" or "net pay" basis
https://www.gov.uk/government/publications/pension-schemes-relief-at-source-for-scottish-income-tax-newsletter-february-2018/pension-schemes-relief-at-source-for-scottish-income-tax-newsletter-february-2018

https://www.thesalarycalculator.co.uk/salary.php

molerat

That is correct. You pay 41% on taxable income of £31580 above your personal allowance. Your pension may or may not be deducted before tax, the auto enrolment pensions are normally taken from taxed income and grossed up by the pension provider to avoid disadvantaging low paid workers. You will have to submit a tax return to reclaim the excess 21% and 41% tax paid in that case.