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BIK and gross salary
Gamechange
Posts: 3 Newbie
in Motoring
I've been offered a company car for the first time and having problems understanding the cost in tax!
The Benefit in kind will tip me into the 40% bracket. But I salary sacrifice into my pension, which takes me well under the 40% bracket.
Does anyone know if the tax band used to calculate BIK is based on gross salary or if you can qualify for 20% if you salary sacrifice pension?
Makes a big difference to cost if I have to pay 40%tax band for BIK!
The Benefit in kind will tip me into the 40% bracket. But I salary sacrifice into my pension, which takes me well under the 40% bracket.
Does anyone know if the tax band used to calculate BIK is based on gross salary or if you can qualify for 20% if you salary sacrifice pension?
Makes a big difference to cost if I have to pay 40%tax band for BIK!
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Comments
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You add on to your salary all your BIK items and then take off all your allowable deductions. That gives you your taxable salary and you then pay the appreciate taxes depending on which bands your salary spans.
Tax isn't worked out on a row by row basis so if you had a company car, private health insurance, an annual Xmas gift (my last employer was £750 of wine) and you ended up £500 into the 40% band the £200 of extra tax paid isn't explicitly pointed to a particular benefit just your overall reward package (though in the above example I suspect most would blame the wine).0 -
Thanks. I hadn't thought of my other BIKs! So salary sacrifice pension wouldn't be taken off as allowed reductions? I was hoping I'd be 20% tax bank for BIK car calculating. I salary sacrifice a lot (30%) into pension so I never actually get close to paying any tax at 40%.0
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Yes pension sacrifice is an allowed reductionGamechange said:Thanks. I hadn't thought of my other BIKs! So salary sacrifice pension wouldn't be taken off as allowed reductions? I was hoping I'd be 20% tax bank for BIK car calculating. I salary sacrifice a lot (30%) into pension so I never actually get close to paying any tax at 40%.1 -
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Yes/no... you can sacrifice them by not having free health insurance or a company car but you cannot salary sacrifice them into a pension.Brie said:Can you salary sacrifice the BIKs?
BIK, other than accommodation, also cannot be considered for checking you are getting NMW - salary sacrifice cannot take you below NMW.0 -
Oh. That's interesting. Thanks.0
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