Company Car Tax and Simple Assessment advice.

Broughski

Hi, I recently received a letter from the HMRC (Simple Assessment) saying that I owe nearly 3K.

I have spoken to them twice, first person said it looked wrong and was going to come back to me (I think I missed their 1 call back), spoke to them again and the second person said the SA amount was ref to my company car and that I should be paying the BIK at 40% not 20%.

Now my wage doesn't reach the higher bracket, but if you add to it the ridiculous BIK (9+K) to it, it does go over by 2-3K, the tax office said because it goes in to the higher bracket I have to pay the whole of the BIK at 40% and along with this they have back dated three years to get nearly 3K owed.

Is it correct that I should have to pay the whole of the BIK at 40% or just the portion that goes in to the higher bracket - like you would if your wage went in to the next bracket?

Please help if you can as it wasn't the best Christmas present to get from the Tax office.

Dazed_and_C0nfused

You only pay higher rate tax on the part of your income (of which company car benefit is an element) which exceeds your basic rate band.

You really need to post details of the calculation for anyone to help you understand if it is correct or not.

And the breakdown of your 2020:21 tax code would help (assuming that is the year the Simple Assessment calculation is for).

Grumpy_chap

Broughski said:

Hi, I recently received a letter from the HMRC (Simple Assessment) saying that I owe nearly 3K.

I have spoken to them twice, first person said it looked wrong and was going to come back to me (I think I missed their 1 call back), spoke to them again and the second person said the SA amount was ref to my company car and that I should be paying the BIK at 40% not 20%.

Now my wage doesn't reach the higher bracket, but if you add to it the ridiculous BIK (9+K) to it, it does go over by 2-3K, the tax office said because it goes in to the higher bracket I have to pay the whole of the BIK at 40% and along with this they have back dated three years to get nearly 3K owed.

Is it correct that I should have to pay the whole of the BIK at 40% or just the portion that goes in to the higher bracket - like you would if your wage went in to the next bracket?

Please help if you can as it wasn't the best Christmas present to get from the Tax office.

For that level of BIK, I suspect that this is for the car plus a fuel card unless you have a particularly generous car scheme or a particularly tax-inefficient choice of car was selected.

If the £9k BIK takes you over the higher rate threshold by £3k ish, then that typically means something like the following:

• Salary £44k
• Car plus fuel BIK £9k
• Total for tax purposes £53k

Only the amount (of the total £53k) above the higher rate threshold (typically £50,271) is subject to 40% tax.  Individual circumstances can adjust where the higher rate threshold actually comes in.  If you are able to make additional pension contributions, that may allow you to avoid higher rate tax.

Broughski

The issue is more that the Tax office said I had to pay 40% on the whole 9+K BIK rather than the 3K which goes in to said higher band.

I'll go through some numbers now but thanks.

I'll also post on any outcome.

Broughski

Grumpy_chap said:

For that level of BIK, I suspect that this is for the car plus a fuel card unless you have a particularly generous car scheme or a particularly tax-inefficient choice of car was selected.

If the £9k BIK takes you over the higher rate threshold by £3k ish, then that typically means something like the following:

• Salary £44k
• Car plus fuel BIK £9k
• Total for tax purposes £53k

Only the amount (of the total £53k) above the higher rate threshold (typically £50,271) is subject to 40% tax.  Individual circumstances can adjust where the higher rate threshold actually comes in.  If you are able to make additional pension contributions, that may allow you to avoid higher rate tax.

The car is a £31K list 2.0L Diesel 67 plate which didn't but now has a lovely 34% BIK rate, hoping to get a hybrid soon to lower the BIK to at least half of this.

Thanks again.

Broughski

Note, no personal fuel allowance, just company miles - fuel card

Grumpy_chap

Broughski said:

Note, no personal fuel allowance, just company miles - fuel card

You are probably subject to full BIK on the fuel card by default.

How do you account for and repay personal fuel?  That will likely have to be deducted to reduce the BIK when you do your tax return.

Broughski

I have the fuel card which initially pays for all fuel, I have to submit my personal mileage monthly which is then deducted - visibly on my wage slip at the current .Gov rate.

Dazed_and_C0nfused

I thought the Simple Assessment calculation detailed the benefits in kind?

Broughski

Dazed_and_C0nfused said:

I thought the Simple Assessment calculation detailed the benefits in kind?

It just quoted what they want me to pay and how to, no details at all.

The issue was that they said I have to pay 40% on the whole of the car BIK - 9K but my basic is <£44

Am going to have to go through P11d's and P60's to work it out again.

I'm PAYE which is also a mystery how it got messed up in the first place.

Dazed_and_C0nfused

A Simple Assessment is a calculation showing the tax owed for a particular tax year.

What exactly is it you have received and for which tax year?