New to Company Car Tax

vundoyo · 9 February 2018 at 12:17PM

Hello,

I am looking for some help with understanding the impact of a company car on my take home (after tax) salary.
My salary is £42000
I make a contribution to my pension of 4%.

The vehicle i am looking at obtaining through the company which will include personal use but not personal fuel (I will be charged the cost of fuel for my private use). Has a P11d value of £26,805 with Diesel Co2 output for 119g/km.

The calculation I have used is 26805 * 25% = £6701.25. My confusion now is sitting with how to calculate this into my salary. I usually use the tool at : thesalarycalculator[dot]co[dot]uk

After inputting my Salary, Pension contribution I am coming to the BiK section. Do i enter: 6701.25 or so i enter 1340.25 which as i am a basic rate tax payer 20% of the BiK value?

Hopefully this makes sense. I'd really appreciate the help!

-J

bob_a_builder · 9 February 2018 at 12:31PM

based on your numbers the value £6701.25 will be what appears on your tax coding and you will actually pay 20% of that a year

Come April the CO2 number will change again
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/532303/TC2b.pdf

So 119g will become 24% plus the 3% diesel surcharge

BoGoF · 9 February 2018 at 12:34PM

You need to add the BIK value of £6701 onto your salary. This will take you into the 40% bracket next year (you would need to apportion this years BIK value.

vundoyo · 9 February 2018 at 12:48PM

Thank you for the responses.

Just so I am totally clear. As of right now with the above into consideration.

Would that takehome be: £2,395.91 or £2,518.97. I'm still trying to get my head around this as it is all new to me.

Mahsroh · 9 February 2018 at 2:06PM

vundoyo wrote: »

Thank you for the responses.

Just so I am totally clear. As of right now with the above into consideration.

Would that takehome be: £2,395.91 or £2,518.97. I'm still trying to get my head around this as it is all new to me.

Based on 17/18 Tax Thresholds (and info you've provided)

Annual salary: £42,000.00
Deduct Pension £1,680.00
Taxable salary: £40,320.00
Benefit in Kind: £6,701.00
TOTAL TAXABLE £47,021

11,500 @ 0% Tax
33,500 @ 20% Tax = £6700
2,021 @ 40% Tax = £808.40
Total Tax Per Annum = £7,508.40

National Insurance = £4,060.00

Total take home pay for the year £28,751.60 (salary after pension - Tax - NI)

£2395.96 per month.

I think! if I've made any errors in my calcs I'm sure others will pick it up. The only area I'm not fully up to speed with is NI calculations - used an online computer to come up with the number above.

Hope this helps!

00ec25 · 9 February 2018 at 3:08PM

Mahsroh wrote: »

I think! if I've made any errors in my calcs I'm sure others will pick it up. The only area I'm not fully up to speed with is NI calculations - used an online computer to come up with the number above.

you are spot on

i find this calculator to be pretty good as it allows pension to be input as a % or £ and the BIK to be done as an annual , monthly or weekly value

https://www.thesalarycalculator.co.uk/salary.php

vundoyo · 9 February 2018 at 4:51PM

thanks everyone!

00ec25 · 9 February 2018 at 9:26PM

Mahsroh wrote: »

The only area I'm not fully up to speed with is NI calculations

NI applies to gross pay, there is no pension offset

42,000 - (157 x 52 = 8,164) = 33,836 x 12% = 4,060

singhini · 10 February 2018 at 7:58PM

Mahsroh wrote: »

Based on 17/18 Tax Thresholds (and info you've provided)

Annual salary: £42,000.00
Deduct Pension £1,680.00
Taxable salary: £40,320.00
Benefit in Kind: £6,701.00
TOTAL TAXABLE £47,021

11,500 @ 0% Tax
33,500 @ 20% Tax = £6700
2,021 @ 40% Tax = £808.40
Total Tax Per Annum = £7,508.40

National Insurance = £4,060.00

Total take home pay for the year £28,751.60 (salary after pension - Tax - NI)

£2395.96 per month.

I think! if I've made any errors in my calcs I'm sure others will pick it up. The only area I'm not fully up to speed with is NI calculations - used an online computer to come up with the number above.

Hope this helps!

Hi, and thanks for putting up a working example.

I do have a quick question and was hoping you might be able to help explain.

Why is the benefit in kind added to the taxable salary? (why does it not reduce the £11,500 tax free allowance?)

Mahsroh · 12 February 2018 at 9:05AM

singhini wrote: »

Hi, and thanks for putting up a working example.

I do have a quick question and was hoping you might be able to help explain.

Why is the benefit in kind added to the taxable salary? (why does it not reduce the £11,500 tax free allowance?)

Good question! I've never fully understood this myself, but ultimately, you end up with the same result! For years now, I've had a company car + other taxable benefits and all year I have a particular tax code which shows a reduction in the tax free allowance, but then when I do my tax return, HMRC calculate it as per my example above.....with the same end result.

This year (17/18) for the first time ever my employer hasn't adjusted my tax code and instead simply makes an adjustment to my taxable pay (i.e. as per the worked example above). I spoke to HMRC to clarify that - apparently more and more companies are doing it that way now....personally I prefer it, seems a lot simpler to do it that way.

sheramber · 12 February 2018 at 1:31PM

Benefit in kind is additional income and part of your total income calculation.

New to Company Car Tax

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