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Where Taxpayers and Advisers Meet

Company car tax

jdc24
Posts:3
Joined:Tue Feb 20, 2018 7:39 pm
Company car tax

Postby jdc24 » Tue Feb 20, 2018 7:51 pm

Hi I have been trying to get my head round how much I will have to pay for a car via a work scheme. from 1st April my salary will just fall into the 40% tax bracket so does that mean I will have to pay 40% on the BIK rate for the car? i.e £24195 x 24% (co2 rate) = 5806 X 40% =23227/12 = 194 per month? Any help appreciated.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Company car tax

Postby bd6759 » Tue Feb 20, 2018 8:20 pm

That looks right.

jdc24
Posts:3
Joined:Tue Feb 20, 2018 7:39 pm

Re: Company car tax

Postby jdc24 » Wed Feb 21, 2018 9:47 am

Thanks bd6759. my salary from the 1st April will be £46696 therefore £346 over the 40% bracket set at £46350 from 1st April so if I buy added pension at £30 per month for 12 months via my salary this would bring my salary down to 46336 (46696-360= 46336) and into the 20% bracket as added pension is not taxed therefore I would pay 20% for a company car?

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Company car tax

Postby bd6759 » Wed Feb 21, 2018 7:34 pm

No. The car takes you into the 40% bracket.

You need to add up all your income, inlcuding the tax value of the benefit, deduct the personal aloowance then dedcut the basic rate band. What you are left with is the amount charged at 40%. You need to pay a pension contribution of that amount to bring you out of the 40% band.

jdc24
Posts:3
Joined:Tue Feb 20, 2018 7:39 pm

Re: Company car tax

Postby jdc24 » Thu Feb 22, 2018 9:40 am

Thanks again, so my understanding to work out the monthly tax I will pay for the car is salary + BIK - personal allowance - first 345500 @ 20% = the remaining to be paid at 40%. 46696 + 5808 = 52504 52504 - 11850 = 40654 40654 - 34500 = 6154 6154*40% = 24616 24616/12 = 205 205 + 62 (driver contribution) = tax payment of £267pm?

The car allowance scheme I am looking to join asks me to choose a tax bracket to work out the BIK and according to HMRC website my earnings for 2017/18 is within the 20% bracket and my salary is frozen so will not increase in 2018/19. I think this is where I am getting confused as I am in the 20% bracket I feel I should click the 20% bracket on the order form as it does not mention anywhere about adding the BIK value to my salary!

Thanks for your patience.jdc24


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