JanH - how do you calculate deductions for company cars then? Dh earns very sligthtly above hte threshold, so will pay 40% tax on the company car. How could he reduce his salary so he only has to pay car tax at 22% rather than 40%. Or is this not possible?
If he earns just above the threshold he may not go into higher rate, and even if he does it's only on the bit above the threshold, not the whole lot. table of allowances and tax bands .
His tax coding notice will have on the LH side his allowances (personal income allowance, pension contributions, gift aid etc) and on the R his deductions (car, petrol, unpaid tax from last year to be recouped this year). The difference between the two is the amount which is tax-free and brings down the tax thresholds.
Simple example - if his car is assessed at £3000 (depends on price and emissions), that would be deducted from £4895 (personal allowance for 05-06) and he would then pay
10% on 1895 - 3985
22% on 3986 - 34295
40% on 34296 onwards.
You need to do the sums titchy, including factoring in the loss of car allowance. Remember you won't have to save up for a car, or pay for tax, insurance and MOT or repairs (I assume). Work out how much you spend on the car now and you'll probably find that its worth it. Not free, obviously, but actually £1500 a year for a car is not that bad! hth