Benefit In Kind Question

salesman1979

Just wondering if BIK pushes you into the higher tax band?

If I earn £45k so am in the lower band but my company car BIK is £15k do I then pay 40% tax?

SamDude

Yes, 40% tax on the 'income' above £50k.

Caz3121

00ec25 wrote: »

you will remain a basic rate taxpayer

unless you are in Scotland where taxable income over £43,430 pushed you into the 41% rate!

SamDude

00ec25 wrote: »

the value of a BIK is simply a number that is added to your cash earnings to give your GROSS taxable pay

you will have gross income of 60k from that you deduct your personal allowance (12,500) so will have NET taxable income of 47,500

you will remain a basic rate taxpayer

0 - 12500 is tax-free
12501 - 50000 is 20% tax
50000+ is 40%

oli356

I'm truly rubbish at understanding tax, but if I put in £60k as a pre-tax earning into https://listentotaxman.com/60000?yr=2019 then it shows that you have to pay £4k a year in tax at 40%. So how would he remain a basic rate taxpayer? Can someone explain please.. I get that the taxable amount is £47.5k~ but I thought the bands went off just gross pay. So even if the personal allowance was £30k, assuming you're salary is £50,001, you pay 40% tax on that £1.

xylophone

https://www.moneyadviceservice.org.uk/en/articles/tax-and-national-insurance-deductions

For example, if you earn £52,000 a year, you pay:

nothing on the first £12,500
20% (£7,500.00) on the next £37,500
40% (£800) on the next £2,000.

xylophone

See also

https://www.gov.uk/estimate-income-tax

oli356

xylophone wrote: »

https://www.moneyadviceservice.org.uk/en/articles/tax-and-national-insurance-deductions

For example, if you earn £52,000 a year, you pay:

nothing on the first £12,500
20% (£7,500.00) on the next £37,500
40% (£800) on the next £2,000.

This was my understanding.


So the OP is on £45,000 a year, he pays:
nothing on the first £12,500
20% (£6,500.00) on the next £32,500 - so he is a basic rate tax payer.

But now add on the £15,000 BIK so he is 'earning' £60,000
nothing on the first £12,500
20% (£7,500.00) on the next £37,500
40% (£10,000) on the next £4,000

and he is now a higher rate tax payer, right? So i'm confused about this sentence "you will remain a basic rate taxpayer"

Dazed_and_confused

The original post stating "you will remain a basic rate taxpayer" has been deleted.

If your taxable income is £60,000 and you haven't made any "relief at source" pension contributions or Gift Aid (charitable) payments* then you will be a higher rate taxpayer and your calculation would be correct providing there was no savings interest or dividend income in the £60,000 taxable income.

*these two things increase your basic rate tax band which can in turn reduce the amount of higher rate tax payable.

oli356

That is what I thought, hence got very confused about the post!

00ec25

Dazed_and_confused wrote: »

The original post stating "you will remain a basic rate taxpayer" has been deleted.

because it has served its purpose

made people think, work out what they understood and therefore why it was incorrect, instead of waiting to be spoon fed basic facts that can simply be looked up and read at leisure

https://lmgtfy.com/?q=taxation+of+benefits+in+kind+uk