We’d like to remind Forumites to please avoid political debate on the Forum.

This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Car BiK Tax

I took on a salary sacrifice lease car in Feb 2025. I am in the 40% tax bracket.
When I submitted the 2024/25 SA, everything shown as expected.
The BiK was added to my income as a benefit, hence I paid 40% tax on the BiK. 
My personal allowance was shown on the calculation as £12570.
So all in order as far as I can tell.

For the 2025/26 period HMRC have taken the BiK figure and reduced my personal allowance by that amount. This is what I'm finding confusing.

Surely that results in me paying 20% tax on the BiK as effectively I start paying tax earlier than £12570?
I'm curious when it comes to SA returns after this tax year, if they then add the BiK as a benefit, would that not mean I end up paying 20% + 40% on the BiK?
Or, if they dont add it as a benefit, then I only pay 20% because its been used to reduce personal allowance.

I'm probably missing something very obvious here, but just wanted clarification.

Comments

  • molerat
    molerat Posts: 34,967 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 26 September at 1:23PM
    Your tax code and your personal allowance are entirely separate things.  They are simply pre leading your BIK against that income stream. Your SA will take any tax already paid into account. 
  • MyRealNameToo
    MyRealNameToo Posts: 1,855 Forumite
    1,000 Posts Name Dropper
    It did it that way last year because your tax code hadn't been changed to deal with it. This year it won't do it the same way as the tax code change has occurred so more tax will be collected at source. 
  • chuffinnora
    chuffinnora Posts: 27 Forumite
    10 Posts Name Dropper
    Ok so it basically means they are collecting the extra tax monthly now, but when the SA returns come along, that will still show a personal allowance of £12570 and the BiK as a benefit (added income) yeah?
    In which case it all balances out at the time as usual I think.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 352K Banking & Borrowing
  • 253.5K Reduce Debt & Boost Income
  • 454.1K Spending & Discounts
  • 245K Work, Benefits & Business
  • 600.5K Mortgages, Homes & Bills
  • 177.4K Life & Family
  • 258.7K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.2K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.