Cash Car Allowance & Correct Net Pay

Swandog

Hi, 

I've recently started a new job and it's taken me into a higher tax bracket. My salary is £50,000 a year (previous £34,000) and I also receive £4,000 per year as a cash allowance for a company car. I have the option after 6 months of joining the company car scheme. I've still to find out more about this. 

In addition to this I also receive a Q bonus which I'm on target to hit which should result in an additional £10,000 per annum gross. 

I'm PAYE and I don't have an accountant. 

When I ran my salary (£50,000) through a payslip calculator on the MSE website and factoring in a 5% pension contribution it showed me my net pay of £2,891. 

My tax code is S 310 T and I live in Scotland. 

When I add in the £4,000 a year cash allowance for a company car my net pay drops to £2,754. 

In my mind having the company car allowance is actually costing me more money per month in net pay as if I didn't receive this my net pay would be higher?

Is this correct? I raised this with the HR team and they advised the tax code and deductions were correct.

Also, I'm married, my wife works part time and we claim child benefit. I've researched that I'll need to complete a tax return and will need to pay some/all of the child benefit back. 

Sorry for the lengthy post, I wanted to try and give as much useful information as possible. 

Thanks for any help. 

Dazed_and_C0nfused

You've lost me, you're getting £4,000 car allowance.

How much less per month is this costing you?

unholyangel

car allowance is treated the same as salary for tax purposes. Likewise with any bonus payment. 

However I would suggest that either you used a different calculator for the salary + car allowance calculation or that you made a mistake when using it. It's giving me a takehome of 3069. BUT (and it's a big but) both of these figures (the 2891 the calculator gives for just salary and the 3069 it gave for salary + car allowance) are based on a standard tax code, which you do not seem to have. 

How is your tax code arrived at? What is the breakdown shown on the personal tax account? 

Typcially car allowances won't be pensionable, which I dont think the MSE calculator takes account of. 

Another point to consider though is that if you have just changed jobs and your previous job was considerably lower.....that any calculation you're doing using the new jobs salary is going to give an incorrect figure. 

Swandog

Hi, 

Sorry for the confusion. 

On my salary of £50,000 per year my net pay is £2,891 per a payslip calculator. 

When I factor in the £4,000 extra for the cash car allowance which is paid at £333.33 per month along side my salary my net pay drops to £2,754.

This is a reduction of £137 per month in net pay comparing both scenarios. 

If I didn't have the £4,000 a year company car allowance my net pay would be £137 per month more i.e. £2,891 rather than £2,754.

Does that make sense? 

Dazed_and_C0nfused

Yes but that is £1,644/year out of £4,000.

Or am I missing something here?

chrisbur

There is an error in the tax calculator on the MSE website.  If you enter a tax code which ends in zero and is followed by the letter T it appears to ignore what is before the zero and uses the tax code 0T giving no tax allowance.  So S310T no tax allowance S311T tax allowance of £3119 a year.

Swandog

On my payslip for October: 

Payments:

Salary: £4,166.67
Pension: -£208.33
Car allowance: £333.33

Total: £4,291.67

Deductions:

Tax: £1,122.56
NI: £409.09

Total: £1,531.65

Net pay: £2,760.02.

Tax code: S310T

I just assumed a salary of £50,000 with an extra £4,000 for car allowance would generate a higher net pay of £2,760.02.

Sorry if I'm not making sense with all of this. 

Swandog

I've just logged into my HMRC tax account. 

On this it has my PAYE tax summary for 6 April 2021 to 5 April 2022:

Previous employment earnings: £9,464. I had a salary of £34,000 but I also received a bonus which took my income for 2020/2021 to £39,555.75.

Current employer: £44,999. I started my new job on the 1st of June. 

I'm not sure how my tax code is calculated. 

Does this information help? Thanks. 

chrisbur

Swandog said:

On my payslip for October: 

Payments:

Salary: £4,166.67
Pension: -£208.33
Car allowance: £333.33

Total: £4,291.67

Deductions:

Tax: £1,122.56
NI: £409.09

Total: £1,531.65

Net pay: £2,760.02.

Tax code: S310T

I just assumed a salary of £50,000 with an extra £4,000 for car allowance would generate a higher net pay of £2,760.02.

Sorry if I'm not making sense with all of this. 

Try changing tax code to S310L    not S310T
Or it seems any letter except T

unholyangel

Okay.....try this calculator but on a monthly basis and input the pension as 208.33 in both scenarios (4166.67 pay versus 4500 pay). https://listentotaxman.com/

This is what your "true" position is. By that, I mean if you were in this new job for the whole year. However, as your previous job was lower paid, it did not use all of the 21% rate band which is why your take home on your payslip is higher than what the calculator says. 

In a nutshell, if not for the previous job being below the 41% rate band, your take home of the £333 allowance would be around £190. 

One further thing though......what sort of job do you have? Don't need specifics. But I'm presuming a job where you need to travel between sites/clients. If so you may have able to claim tax relief on some of the mileage (can't claim for anything which is classed as ordinary commuting).  

chrisbur

Swandog said:

On my payslip for October: 

Payments:

Salary: £4,166.67
Pension: -£208.33
Car allowance: £333.33

Total: £4,291.67

Deductions:

Tax: £1,122.56
NI: £409.09

Total: £1,531.65

Net pay: £2,760.02.

Tax code: S310T

I just assumed a salary of £50,000 with an extra £4,000 for car allowance would generate a higher net pay of £2,760.02.

Sorry if I'm not making sense with all of this. 

This suggests that you might be comparing this payment with one in the past if so can you advise details of this, if not why did you expect a higher figure.  The calculations you have made on the tax calculators are wrong possibly due to you using the wrong figures possibly due to the calculator as I said earlier.
I have checked these figures and the tax is correct on a month 1 basis does your payslip have any year to date figures?
EDIT  Or anything after the tax code eg X mth1 1 NC NON cumulative.
Looking back you say "Previous employment earnings: £9,464"
If that is correct then your code of S310T looks like it was applied on a non-cumulative basis.  This would suggest that your tax code earlier in the year was higher than this.  Have you had anything explaining why your tax code is S310T The 310 bit not the S or the T