What is my tax bracket when working out company car tax?

newparent77

Sorry if this is an obvious one, but after Googling for a while I can't find a straightforward answer!

I'm lucky enough to have got a new job, which comes with the option of either a company car or car allowance. I'm just trying to find out which would leave me better off by using the various tax calculators but I'm struggling to work out which rate of tax to use.

My base salary is £48,000. The car allowance is an extra £6,000 per year so if I took that, believe I would be over the bracket for paying higher rate of tax (£54,000). But if I took a company car, the money I received would stay at £48,000 so just the standard rate of tax. But, I would be in receipt of a car so would have that as an added value.

So my question is, when working out the company car tax on just receiving the car, do I just say that I'm a basic rate of tax payer as I'll receive £48,000 salary?

Hope that makes sense!

Car_54

You need to find or (work out) the BIK value of the car, and add that (along with any other taxable perks) to your salary. Anything over £50,270 will be taxed at the 40% rate.

MEM62

You will need to know the P11D value of the car.  You can then look up on HMRC's website the value of the car benefit and fuel benefit.  These figures will be added to your income for tax purposes.  

newparent77

Ah, great, thanks both. So say the BIK tax is £9k, I add that to the £48,000 basic salary and then select that I'm in the 40% tax bracket? Makes sense, thanks!

DullGreyGuy

newparent77 said:

Ah, great, thanks both. So say the BIK tax is £9k, I add that to the £48,000 basic salary and then select that I'm in the 40% tax bracket? Makes sense, thanks!

But remember its by band... so you wouldnt pay the full £9k at 40% as the first £2k and a bit is in your basic rate (depending on what other benefits you have which may increase your BIK value or reduce your taxable income)

doningtonphil

Do you know what car you will be getting?  Cna you choose?

Dazed_and_C0nfused

You may well find some websites that claim you pay 20% or 40% on a company.

Which is utter rubbish.

The taxable benefit is part of your taxable income for the year so some might be taxed at 20% and some at 40%.

And as part of your taxable income, which is in turn part of your adjusted net income, it can mean you pay more High Income Child Benefit Charge.  

Aretnap

You don't mention pension, but you can reduce your taxable income by making/increasing pension contributions. This is well with thinking about it the car is going to push you into higher rate tax and/or child benefit clawback (I assume the latter is an issue given your username).

Mutton_Geoff

I was going to mention pensions too. At those sort of earnings, you should certainly be using pensions contributions, to stay out of higher rate tax bands but more importantly for your future.