Company Car Tax

[Fr0dders]

a friend of mine at work is being promoted within our company to a field based role. This means lots of visits to customers so he gets a company car.

This benefit apparently comes in the form of a cash allowance of circa £500 a month before any kind of tax.

Does anybody know how you would calculate the tax on that allowance, is it the normal way of the BIK value etc.. or a different way ?

 

[Jez]

Additional cash allowances are simply taxable as additional income. So the standard 40%. If he is simply being paid cash then he is not getting a company car, he is receiving a £500pm pay rise to compensate him for the use of his own car.

 

[Fr0dders]

he can use his own car i believe yes so that sounds like what he's getting. I thought it was his normal tax rate.

The whole package including company car tax , will be below the 40 % rate of approx 37k does that mean it will get taxed at the same 20% of the rest of his income ?

 

[Jez]

40% starts at ~43k, not 37 It will be taxed at whatever his top rate is, so if the total package including this £6000pa car allowance is below £43kpa then he will just pay 20% + NI on the additional income.

 

[Fr0dders]

thanks jez

 

[Participant]

40% starts at ~43k, not 37 It will be taxed at whatever his top rate is, so if the total package including this £6000pa car allowance is below £43kpa then he will just pay 20% + NI on the additional income.

40% starts at £37,401 according to http://www.hmrc.gov.uk/rates/it.htm.

 

[Fishman]

You need to add your personal allowance to that

 

[Jez]

40% starts at £37,401 according to http://www.hmrc.gov.uk/rates/it.htm.

You receive ~£6500 personal allowance before BIK deductions on top of that.

 

[Fr0dders]

40% starts at £37,401 according to http://www.hmrc.gov.uk/rates/it.htm.

i made the same mistake lol.