Company Car Tax help!

pamelab21

Hi


Looking for some help, hubby has company car and new tax year 2019-2020 has come in and he has the following listed:
personal allowance £12500
less car benefit £7824
less fuel benefit £6989
tax free amt = - £2313
Therefore am I correct in saying that he owes tax before he has even earned a penny?


Also he is told over the page that he will pay:
19% on first £2049
20% between £2050 and £12444
21% between £12445 and £30930
41% between £30931 and £150000


I was of the understanding that the 40%+ tax bracket did not kick in until after anyone earns £40k but he can only earn £30930 before getting taxed at this rate. is that correct?


Thanks

Linton

pamelab21 wrote: »

Hi


Looking for some help, hubby has company car and new tax year 2019-2020 has come in and he has the following listed:
personal allowance £12500
less car benefit £7824
less fuel benefit £6989
tax free amt = - £2313
Therefore am I correct in saying that he owes tax before he has even earned a penny?

No - the benefits are another form of income which is liable to tax. However PAYE cannot handle this "income" in the same way as cash earnings so the tax allowance is reduced with the same net effect. In your husband's case this extra "income" exceeds the tax allowance so he is a given a negative tax allowance.

Also he is told over the page that he will pay:
19% on first £2049
20% between £2050 and £12444
21% between £12445 and £30930
41% between £30931 and £150000


I was of the understanding that the 40%+ tax bracket did not kick in until after anyone earns £40k but he can only earn £30930 before getting taxed at this rate. is that correct?

Like I said his car benefits are earnings as much as his cash income, so yes they may cause his total income to exceed the 40% level. It could be worth checking whether it would be more tax efficient if he was able to substitue higher pay for the benefits, paid for his own car and fuel and was reimbursed for work travel by his employer.

Tuharax

I have recently dealt with a similar situation. I would recommend removing the fuel benefit £6989. If you typically do less than 600 personal miles a month it should save you a lot of money. He should speak to HR and see if they are able to deduct personal mileage from his salary each month. This is usually at around 0.11p per mile for a 2.0 diesel. Have a look at the HMRC Advisory Fuel Rates (AFR) for company car users. I do around 400 personal miles so 44 pound is taken from my monthly salary. However, this saves me 170 pound in tax a month on the fuel. The other way is to pay for all the cars fuel and claim back the business miles element. I opted for the first method as it seems easier and you are not left waiting for an expense payment each month to offset all the fuel you have bought.