Wrong tax taken from wages

penners324

Hoenir said:

purpleparrotuk said:

Penguin_ said:

So normally on a purpleparrotuk said:

Penguin_ said:

How do HMRC know that your husband has a car then?

There isn't a "salary sacrifice" option in payroll software when you report a car. You tick a box to say it's being payrolled which then means you pay the BIK tax in real time & it wouldn't be on a P11d.

The forms haven’t been filled in correctly. They need to know how much we are getting deducted for the scheme etc. There must be somewhere to enter this, otherwise how is any car salary sacrifice done 

You need to understand how a salary sacrifice works.

With company cars you can pay towards some of the cost if you want a better car than your employer offers. This is then taken off the P11d value of the car.

Under Salary Sacrifice, your payments reduce your taxable income so you pay less tax & NI through your payslip. Your deduction isn't a contribution to the car.

It’s not a company car. His company are offering nothing. It’s just a company car for insurance purposes. 

That must mean that the lease is in the Company's name. For all intents and purposes the Company is the hirer. 

"If salary is sacrificed in return for a company car you will pay Income Tax on either the amount of salary you sacrifice or the value of the car, whichever is the greater."

A salary sacrifice car is a Lease by the company. And is thus a company car..

There is a section on the p11d that works out the annual cash Equivalent of the car, which us the amount you're taxed on. Ie 2% of p11d value of the car. If this wasn't filled in the p11d value of the car will be 100% of the value of the car

penners324

purpleparrotuk said:

Penguin_ said:

If it's the model I think it is, it has 153 g/km CO2 emissions which means he is subject to a whopping 35% BIK Tax on the P11d value of the car. 

It’s an electric car. No emmisions. It’s fine we know what’s happened. The tax office have £0 payments in the salary sacrifice section so it’s wrong. 

There is nowhere to add salary sacrifice details on the p11d form. It's done on the cash Equivalent section.

His employer needs to correct the p11d issued, and very quickly

Hoenir

la531983 said:

He owes tax from a previous year, thats only going to compound the issue.

Or was there an upfront deposit on the vehicle lease , i.e. 3 months advance rental paid. 

Dazed_and_C0nfused

penners324 said:

purpleparrotuk said:

Penguin_ said:

If it's the model I think it is, it has 153 g/km CO2 emissions which means he is subject to a whopping 35% BIK Tax on the P11d value of the car. 

It’s an electric car. No emmisions. It’s fine we know what’s happened. The tax office have £0 payments in the salary sacrifice section so it’s wrong. 

There is nowhere to add salary sacrifice details on the p11d form. It's done on the cash Equivalent section.

His employer needs to correct the p11d issued, and very quickly

Based on the op this seems to be a new company car, i.e., it was first available after 5 April 2024. 

In which case where does a P11D fit in at the moment?

penners324

Dazed_and_C0nfused said:

penners324 said:

purpleparrotuk said:

Penguin_ said:

If it's the model I think it is, it has 153 g/km CO2 emissions which means he is subject to a whopping 35% BIK Tax on the P11d value of the car. 

It’s an electric car. No emmisions. It’s fine we know what’s happened. The tax office have £0 payments in the salary sacrifice section so it’s wrong. 

There is nowhere to add salary sacrifice details on the p11d form. It's done on the cash Equivalent section.

His employer needs to correct the p11d issued, and very quickly

Based on the op this seems to be a new company car, i.e., it was first available after 5 April 2024. 

In which case where does a P11D fit in at the moment?

In that case it'll be the P46 (car) declaration that has been submitted incorrectly.

Grumpy_chap

Hoenir said:

"If salary is sacrificed in return for a company car you will pay Income Tax on either the amount of salary you sacrifice or the value of the car, whichever is the greater."

That doesn't apply for EV.
The BIK should be on 2% of £60k

Grumpy_chap

I thought I would add to my post above as finding a statement to verify what I wrote is not easy (at least not one from Gov / HMRC sites).  It is a combination of the following:

https://www.gov.uk/expenses-and-benefits-company-cars/work-out-the-value

Salary sacrifice arrangements

If the cost of the cars and fuel is less than the amount of salary given up, report the salary amount instead.

https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye#examples-of-salary-sacrifice

If you set up a new salary sacrifice arrangement, you’ll need to work out the value of a non-cash benefit by using the higher of the:

• amount of the salary given up
• earnings charge under the normal benefit in kind rules

For cars with CO2 emissions of no more than 75g/km, you should always use the earnings charge under the normal benefit in kind rules.

So, it seems as though the employer / payroll have declared the OP's original salary (amount sacrificed) as this is more than the BIK for the EV.  The OP may need to draw payroll's attention to the second link above, so the normal BIK applies, currently 2% for EV:

https://www.gov.uk/guidance/company-car-benefit-the-appropriate-percentage-480-appendix-2

(Zero CO2 maps to 2% BIK)

frenziedmonkey

Just to compound this, although salary sacrifice car schemes are considered to be company cars for the purposes of BIK, HMRC doesn't consider any contributions towards personal use of the vehicle as 'allowable' as they're gross pay deductions. So the P11d will show £0.00 in this field and there is no associated reduction of tax liability, regardless of how much you pay towards the vehicle. This is the complete opposite of company car schemes deducted from net pay, where everything except elements such as motor insurance and admin. are allowable. Bit annoying tbh!

purpleparrotuk

Thanks for all your comments. I didn’t notice quite a few of them. Just to update this thread, it was the HMRC that entered the vehicle as a non EV thus paying the higher BIK. The P46 was correctly filled out by the employer.  It’s now been changed and the tax code has gone back to a slightly lower one than the before the salary sacrifice started. I am guessing to allow for the BIK tax to be taken. Just need to make sure we are paid back the £300 that was incorrectly taken at the higher BIK this month. 

Dazed_and_C0nfused

purpleparrotuk said:

Thanks for all your comments. I didn’t notice quite a few of them. Just to update this thread, it was the HMRC that entered the vehicle as a non EV thus paying the higher BIK. The P46 was correctly filled out by the employer.  It’s now been changed and the tax code has gone back to a slightly lower one than the before the salary sacrifice started. I am guessing to allow for the BIK tax to be taken. Just need to make sure we are paid back the £300 that was incorrectly taken at the higher BIK this month. 

The employer can only make a tax adjustment if the new tax code was issued on a cumulative basis and not a non cumulative basis (sometimes referred to as week 1/month 1 basis).