Company car BIK / Child benefit query

a1pacino

Hi all,

I would appreciate some advice regarding the £50k child benefit threshold.

My salary before tax is £46k and I had a bonus of £4K, I have a company car which is a BIK valued at £7,700 pa which I only use for work but is classed as BIK as I can use for personal use if I wish to.

My current tax code is 481L as I believe they have already taken my company car BIK tax off my original PA.

I am confused as to whether this is sufficient to keep me under the £50k child benefit threshold as I have read that I would have to add the £7,700 company car onto my wage and bonus which would make it £57,700 for the year, but if the company car cost has already been taken from my Personal allowance do I still need to add this onto my salary and bonus?

I am the only earner in my household and want to make sure I don’t get a bill from Child benefit or lose it either, I read that if you put more into your pension that helps so I now pay 10% of my wages into company pension which equates to £382.50 per month.

Any advice would be very much appreciated.

Dazed_and_confused

You are getting a bit confused.

Your Personal Allowance can only be £4,810 if your "adjusted net income" (which is also relevant for the High Income Child Benefit Charge) is £115,380.

I think you probably mean your tax code allowances.

You need to read up on "adjusted net income".

And in particular understand the difference between "salary" (generally irrelevant for tax) and taxable pay/salary i.e. the amount which goes on your P60.

But essentially your tax code is also irrelevant for High Income Child Benefit Charge purposes.

Add all your taxable income, including the car benefit (and any other company benefits such as medical insurance) and things like taxable savings interest i.e. not ISA interest.

Then find out what type of pension scheme you are in. Most likely net pay, relief at source or salary sacrifice. All are treated differently and it is important you know which one you have otherwise you will not be able to work this out.

On face value you will be paying most of the Child Benefit back. Anything due back for 2019:20 will be payable on 31:01:2021 (although it is sometimes possible to pay it back through your 2021:22 tax code (not your 2020:21 tax code).

Take home pay is completely irrelevant for pretty much anything tax related.

xylophone

https://www.gov.uk/child-benefit-tax-charge

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/reduce-high-income-child-benefit-charge/

a1pacino

Dazed_and_confused wrote: »

You are getting a bit confused.

Your Personal Allowance can only be £4,810 if your "adjusted net income" (which is also relevant for the High Income Child Benefit Charge) is £115,380.

I think you probably mean your tax code allowances.

You need to read up on "adjusted net income".

And in particular understand the difference between "salary" (generally irrelevant for tax) and taxable pay/salary i.e. the amount which goes on your P60.

But essentially your tax code is also irrelevant for High Income Child Benefit Charge purposes.

Add all your taxable income, including the car benefit (and any other company benefits such as medical insurance) and things like taxable savings interest i.e. not ISA interest.

Then find out what type of pension scheme you are in. Most likely net pay, relief at source or salary sacrifice. All are treated differently and it is important you know which one you have otherwise you will not be able to work this out.

On face value you will be paying most of the Child Benefit back. Anything due back for 2019:20 will be payable on 31:01:2021 (although it is sometimes possible to pay it back through your 2021:22 tax code (not your 2020:21 tax code).

Take home pay is completely irrelevant for pretty much anything tax related.

Hi,

Thank you for your response, apologies I made a couple of goofs there! I meant my salary is £46k before tax and that my tax code is 481L.

I am still unsure about whether the company car BIK is still added onto salary when working out the £50k CB threshold as I am being taxed on it at source.

I will look into those pension schemes and how to work out adjusted net income,

BoGoF

It doesnt matter that it is taxed at source. Your income for child benefit purposes is your salary plus your benefit in kind.

Dazed_and_confused

Forget about your tax code, that doesn't have any bearing on the High Income Child Benefit Charge.

If your taxable salary/pay does turn out to be £46k then you have to add the car benefit to that as it part of your taxable income. Ultimately it is what is reported on your 2019:20 P11D in a year's time that really matters but your 2019:20 tax code deduction should give you a good idea.

Most pension payments cannot be deducted for High Income Child Benefit Charge purposes, simply because they have already been taken into account earlier in the process.

For example salary £46k with salary sacrifice of 20% means your P60 will show taxable pay/salary of £36,800. Salary sacrifice means you don't actually pay into a pension, your employer does, so there is nothing to deduct pension wise (unless you have a personal pension as well).

£46k with net pay contributions of say 10% means your P60 will show taxable pay/salary of £41,400. Although you have paid into the pension you cannot deduct these contributions for HICBC purposes as they have already been deducted to get to the P60 value.

Relief at source contributions (often a personal pension or SIPP) can be deducted for HICBC purposes but these contributions do not reduce your taxable income. They increase the amount of basic rate tax payable which in turn reduces any higher rate tax payable.

uknick

a1pacino wrote: »

.... I have a company car which is a BIK valued at £7,700 pa which I only use for work but is classed as BIK as I can use for personal use if I wish to.

Why on earth do you pay the BIK if you never use it for personal use?

Dazed_and_confused

Presumably it is "available" for use.

Always a difficult hurdle to overcome with company cars!

uknick

That's what I'm thinking, just wondered why he said he only uses it for business use and if not, why make the comment. He is trying to reduce his pay below £50k, and I guess that would be one easy way if he never uses it for personal use.

sheramber

uknick wrote: »

That's what I'm thinking, just wondered why he said he only uses it for business use and if not, why make the comment. He is trying to reduce his pay below £50k, and I guess that would be one easy way if he never uses it for personal use.

He would have to leave it at work and commute by some other means as travelling to and from work is personal use.

If the car is at his home it is available for private use.