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Where Taxpayers and Advisers Meet

19/20 higher rate threshold and BIK

Posts: 1
Joined: Sun Nov 18, 2018 1:40 am

19/20 higher rate threshold and BIK

Postby SouthYorksGent » Sun Nov 18, 2018 2:01 am

After believing I’d always had a better than average grasp on taxation, company car tax and how to calculate it all, I’ve gone and confused myself and could do with some clarity.

Based on the 19/20 tax year with the standard personal allowance being £12,500 and the 40% thresh at £50k...

From April my basic will be £47,750

I will have a company car with a BIK of £9716

I will pay a minimum of £2500 to my pension

My bonus, whilst up to 30% will likely be around £4000

Question - is the car BIK added to my basic, putting me in the 40% bracket?

Let’s say £47,750 - £2,500 pension cont’ = £45,250 + £9,716 car BIK = £54,966 + £4,000 bonus = £58,966

So I would pay 40% on £8,965 (£3,586) plus 20% on £37,500 (£7,500)

If I claimed child benefit for my three children (total of £2500) I’d have to pay back 89/90% of that! (Which is utterly disgraceful if my calcs are correct!)

Am I working it out correctly? Thanks

Posts: 61
Joined: Thu Dec 22, 2016 10:04 pm

Re: 19/20 higher rate threshold and BIK

Postby D&C » Sun Nov 18, 2018 11:33 pm

First thing is pension contributions generally end up providing tax relief in one of two ways and it's useful to know which one you are referring to.

If we take your basic as an example I think you mean your P60 would show pay of £45,250. But thappy to be corrected if this is wrong.

The car benefit is effectively extra pay. The benefit value (reported on your P11D each year) is part of your taxable income for both income tax purposes and when calculating the High Income Child Benefit Charge.

Google "adjusted net income" for more detail about how this is used for the HICBC.

Everyone has different financial priorities but in your situation additional pension contributions are often seen as very tax efficient as you will get higher rate tax relief and they will help minimise the HICBC.

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