How does BiK tax work if you don’t earn enough to pay income tax?

Money_Saving_Bloke

Hi everyone,

I work part-time and earn just below the personal allowance, so I don’t currently pay income tax. My employer offers a salary sacrifice scheme where you can buy technology products and have the cost taken from your pre-tax wages, which I’m interested in as my current laptop is quite old and could do with being replaced. The website for my employer’s scheme mentions BiK tax would be payable in lieu of income tax, but doesn’t mention how or even if it would apply to employee’s who don’t earn enough to pay income tax in the first place. Is there anyone else who’s been in a similar situation, or is just more knowledgable about the tax system in general and able to advise?

Thanks in advance.

Dazed_and_C0nfused

There is no such thing as BIK tax.

A company benefit (BIK) is just treated as additional income and is taken into account when calculating how much tax you are liable to.

Say your taxable pay (P60) figure is £12,000 and you have a BIK of £1,000 then you would pay tax on £500 (£13,000 less Personal Allowance £12,500).

The above assumes you haven't applied for Marriage Allowance for the tax year in question.

Money_Saving_Bloke

Dazed_and_C0nfused said:

There is no such thing as BIK tax.

A company benefit (BIK) is just treated as additional income and is taken into account when calculating how much tax you are liable to.

Say your taxable pay (P60) figure is £12,000 and you have a BIK of £1,000 then you would pay tax on £500 (£13,000 less Personal Allowance £12,500).

The above assumes you haven't applied for Marriage Allowance for the tax year in question.

Right, ok. Thanks, I think I understand now. 😀

unholyangel

Be aware with salary sacrifice, you will be taxed on the higher value of:
1) the salary sacrifice
2) the bik value

Also (since your employer likely won't tell you this) update hmrc with the bik info as soon as you're aware what it is. If you don't inform them, you'll likely not pay enough tax and then have to pay more in a future year to make up for it.