Working out net pay with BIK & salary sacrifice

CrickJon

Hi all

Please can someone tell me if I am working out my net pay correctly. My employer does not payroll BIK so I get a P11D with company car valued at £5,589 and medical at £437, so a total of £6,026).

Salary £55,237
8% Pension salary sacrifice £4,419
Taxable pay £50,818

Personal allowance £6,544 (tax code 654L - £12,570 less £6,026 above).

Income tax at 20% = £8,745 (£50,270 - £6,544 multiplied by 20%)
Income tax at 40% = £219 (£50,818 - £50,270 multiplied by 40%)
Total income tax £8,965

NI contributions 8% = £3,016 (£50,270 - £12,570 multiplied by 8%)
NI contribution 2% = £11 (£50,818 - £50,270 multiplied by 2%)
Total NIC £3,027

Net pay £50,818 - £8,965 - £3,027 = £38,827

1. I don't believe I need to add my BIK to my taxable pay as my employer does not payroll it so it is reflected instead by the reduction in my personal allowance. Is this correct?
2. Is the 8% NIC paid between £50,270 and either the standard PA of £12,570 or should it be my PA of £6,544?

Many thanks

Dazed_and_C0nfused

That is not how many people would calculate it and you do seem to be overcomplicating things.

Your tax code is completely irrelevant.

Salary sacrifice contributions can never be deducted in any tax calculation personal to you as they are employer contributions.

Assuming you haven't omitted any other taxable income such as interest or dividends then yu add all your taxable income to start (£50,818 + BIK on your P11D).

Then deduct your Personal Allowance and tax the remainder using the appropriate rate bands.

Your Personal Allowance and tax code are of no relevance whatsoever to National Insurance.  NI is calculated independently each pay day and the starting point is £1,048/month.

https://www.gov.uk/national-insurance-rates-letters

amanda1024

I *think* you pay 20% on £37,700 despite the change in tax code - then 40% on everything over £6540 + £37,700. Try the tax code checker: https://www.tax.service.gov.uk/guidance/get-help-understanding-your-tax-code/start/where-do-you-live

CrickJon

Dazed_and_C0nfused said:

That is not how many people would calculate it and you do seem to be overcomplicating things.

Your tax code is completely irrelevant.

Salary sacrifice contributions can never be deducted in any tax calculation personal to you as they are employer contributions.

Assuming you haven't omitted any other taxable income such as interest or dividends then yu add all your taxable income to start (£50,818 + BIK on your P11D).

Then deduct your Personal Allowance and tax the remainder using the appropriate rate bands.

Your Personal Allowance and tax code are of no relevance whatsoever to National Insurance.  NI is calculated independently each pay day and the starting point is £1,048/month.

https://www.gov.uk/national-insurance-rates-letters

I do not think you are correct when the BIK is not payrolled by an employer. In most cases employers DO payroll BIK, hence I would agree with you, in that case I should add it to my taxable pay of £50,818 (I have no dividends or interest income).

My understanding is you cannot have BIK reflected in both your taxable pay AND your tax code. It is either one or the other. In taxable pay if payrolled by your employer and in your tax code if it isn't? See here: https://community.hmrc.gov.uk/customerforums/pt/a0fb7a22-888f-ee11-a81c-000d3a86dfe6

"It would depend if the employer is payrolling the benefit or not.
If payrolling then the car benefit in kind is added to the salary and taxed and would not then be shown as a deduction in your tax code.
If not payrolled then it would be shown as a deduction in the code to collect the tax."

Also, regarding my calculation of NI, thanks, I did not think my Personal Allowance had anything to do with it, so I have calculated it correctly I believe.

Dazed_and_C0nfused

If all you want to do is check your take home pay then you can use the first two calculations here.

https://www.gov.uk/government/collections/how-to-manually-check-your-payroll-calculations

Just remember NI is not cumulative and your tax code is only ever provisional so won't necessarily reflect the actual tax that is going to be payable.

molerat

Your tax calculation is messed up.

A code of 654 will give £6549 tax free

£50818 - £6549 = £44268 subject to tax

The first £37700 is taxed at 20% = £7540

The remainder at 40%, £44268 - £37700 = £6568 x 40% = £2627.20

Total tax £10167.20

NI, provided salary is equal monthly

£50818 - £12576 = £38242 subject to NI

The first £37692 at 8% = £3015.36

The remaining £550 at 2% = £11

£3026.36 total

CrickJon

Ah thanks. I realise my mistake. I was assuming the higher tax rate kicks in with a SALARY above £50,270 but I realise now, it's TAXABLE INCOME above that figure.