Company Car Tax Question?
Discussion
Hi, I have a question bout CC tax and I am not getting much help from HMRC or my work. Every time I ask I get a different answer. Cut a long story short I have a £3,000 is Company Car bill (and I still have a car now). MY work never informed HMRC correctly and the first 1/2 year I owed £900ish and this year already £2,300ish behind. I am now on a K326 code to recoup the back tax which is hurting. I work for BMW so I always get a nice car but it is taken over an averaging scheme. I drive everything from a 118d M Sport (current) to Z4's and 520d M Sports etc. They range from £26,000 to near £40,000 (which I try to avoid).
I am thinking of coming out of the scheme and getting a cheap PCP on a car as I only travel 5 minutes to work each day so I don't need the big tax bill.
To work out what my car is costing is this on the right track?
No company car is an L810 code. If my company car is a taxable benefit of say £5,000 my tax code should go to L310. Since they got it all worn with advising HMRC I now have the above bill.
Does the £5000 benefit actually cost me £5000 or is it £5000 of my income and I pay tax on the balance. For example if I made £40,000 do I actually get the £5000 off and pay tax on £35,000 so effectively the £5000 is minus 40% so my car really cost me £3,000 per year so £250 a month.
Is that right? Any advice you can give would be great.
I am thinking of coming out of the scheme and getting a cheap PCP on a car as I only travel 5 minutes to work each day so I don't need the big tax bill.
To work out what my car is costing is this on the right track?
No company car is an L810 code. If my company car is a taxable benefit of say £5,000 my tax code should go to L310. Since they got it all worn with advising HMRC I now have the above bill.
Does the £5000 benefit actually cost me £5000 or is it £5000 of my income and I pay tax on the balance. For example if I made £40,000 do I actually get the £5000 off and pay tax on £35,000 so effectively the £5000 is minus 40% so my car really cost me £3,000 per year so £250 a month.
Is that right? Any advice you can give would be great.
The tax is a Benefit In Kind (BIK) this is an amount calculated on the CO2 emmisions and P11D value of the car.
The BIk is a reduction in the tax free amount you earn before paying tax. The standard tax free amount is £9.7K (ish) so the £5000 tax bill brings your tax free earnings down to £4,700 so you're paying tax on more of your earnings.
On £40k you were paying tax on £30,300 you're now paying it on £35,300
That's the very simple maths, the accountants will be on soon to fill in the detail
The BIk is a reduction in the tax free amount you earn before paying tax. The standard tax free amount is £9.7K (ish) so the £5000 tax bill brings your tax free earnings down to £4,700 so you're paying tax on more of your earnings.
On £40k you were paying tax on £30,300 you're now paying it on £35,300
That's the very simple maths, the accountants will be on soon to fill in the detail
From the Internet.
[quote]
The first thing you need to know is the P11d value. This is the RRP of the car minus first registration fee and road tax. It does include VAT, delivery and all optional extras. For my Astra the basic P11d price is £22,670, but we've got loads of options on it too which bring the P11d value up to £25,490.
Next, we need to work out which band the car falls into. Taking the CO2 emissions of 119g/km and comparing to the company car tax table here you can see the car sits in the 13% benefit-in-kind threshold.
So to find out how much tax you pay, simply take the P11d value and times by the percentage. In this case, that's £25,490 x 0.13 = £3313.70
Now you multiply that number by the relevant amount of tax you have to pay. If you earn less than £37,000 you're on the basic rate of 20%. If you earn between £37,001 and £150,000 you're a higher rate payer and pay 40%. Anything above that and you're an additional rate payer and are in for 50%.
So, assuming you’re a 20% tax payer, you'd take £3313.70 x 0.2 = £662.74
We now have the annual tax bill. For monthly amounts simply divide by 12.
£662.74 / 12 = £55.23 per month in company car tax. Not bad value when you compare the same car on a four year PCP scheme could cost around £470 each month.
[/quote]
Your P11D should have an amount that you're being taxed on if you're in bandings (I do)
I'm also in the same boat with the tax, my company screwed up and I've by paid company car tax for 12 months despite calls to the taxman from myself to try and organise it.
It's all b
ks anyway. Tax is just an arse to sort out.
[quote]
The first thing you need to know is the P11d value. This is the RRP of the car minus first registration fee and road tax. It does include VAT, delivery and all optional extras. For my Astra the basic P11d price is £22,670, but we've got loads of options on it too which bring the P11d value up to £25,490.
Next, we need to work out which band the car falls into. Taking the CO2 emissions of 119g/km and comparing to the company car tax table here you can see the car sits in the 13% benefit-in-kind threshold.
So to find out how much tax you pay, simply take the P11d value and times by the percentage. In this case, that's £25,490 x 0.13 = £3313.70
Now you multiply that number by the relevant amount of tax you have to pay. If you earn less than £37,000 you're on the basic rate of 20%. If you earn between £37,001 and £150,000 you're a higher rate payer and pay 40%. Anything above that and you're an additional rate payer and are in for 50%.
So, assuming you’re a 20% tax payer, you'd take £3313.70 x 0.2 = £662.74
We now have the annual tax bill. For monthly amounts simply divide by 12.
£662.74 / 12 = £55.23 per month in company car tax. Not bad value when you compare the same car on a four year PCP scheme could cost around £470 each month.
[/quote]
Your P11D should have an amount that you're being taxed on if you're in bandings (I do)
I'm also in the same boat with the tax, my company screwed up and I've by paid company car tax for 12 months despite calls to the taxman from myself to try and organise it.
It's all b
ks anyway. Tax is just an arse to sort out.The problem is, it's so complicated even the tax office struggle to get it right when there have been past incorrect settings.
If it has been wrong for a while, and you are on an average system (not sure now these work exactly) then there will be quite a few errors to correct.
You are behind with tax owed, plus you have the current rate you should be on, they add the owed onto the current to claw it back quickly so you will now be paying a lot more than you would if you were on the correct code. Does that make sense?
PAYE + BIK = PITA
If it has been wrong for a while, and you are on an average system (not sure now these work exactly) then there will be quite a few errors to correct.
You are behind with tax owed, plus you have the current rate you should be on, they add the owed onto the current to claw it back quickly so you will now be paying a lot more than you would if you were on the correct code. Does that make sense?
PAYE + BIK = PITA
If the BIK value on your P11d last year was £5k, then this would be used on your current tax coding until the 12/13 P11d's are submitted (due by July 5).
The £5k is an increase in your income to which your highest marginal rate is applied - so @ 40% you pay £2k per annum divided into monthly deductions of £166.67.
The pain of paying your £3k of arrears will be adding £250 per month.
If you want to scan me your tax code I can comment further - PM me if you wish to do this.
David
The £5k is an increase in your income to which your highest marginal rate is applied - so @ 40% you pay £2k per annum divided into monthly deductions of £166.67.
The pain of paying your £3k of arrears will be adding £250 per month.
If you want to scan me your tax code I can comment further - PM me if you wish to do this.
David
HMRC send out by post detailed notices of coding to employees. These give a breakdown of the elements that make up the coding. They should have sent you a coding for 2013/14 sometime after January 2013.
If you didn't receive one, it could be that they haven't got the correct home address for you.You could always ring them and ask for the details of the coding.
The employer gets a simplified notice of the coding which doesn't give the breakdown.
If you didn't receive one, it could be that they haven't got the correct home address for you.You could always ring them and ask for the details of the coding.
The employer gets a simplified notice of the coding which doesn't give the breakdown.
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