Any tax gurus out there? BIK with a car

[Wishmelucknow]

Can anyone help. Every year despite self assessment I keep getting told I owe the taxman more and more money! Happy to pay my dues but feel I’m worse off even though I got a supposed pay rise.

i did get a car. It’s a green car lease deal so it’s not ‘free’ as a perk. They take the money out of my pay and as far as I understand I need to pay BIK. I did the online calculation and seemed to say I’d pay around £770 a month. However I’ve now had a new tax code delivered saying now I have no tax free allowance and that car plays some part in that to a cash equivalent of which £11050 of that is the car for 2023. Does that sound right?

when they say is this being taxed at source by your employer how do you know that ? Should I be putting this on my tax return if the money is essentially taking it out my pay each month? Frustratingly tax off self assessment isn’t open until September.

If it’s on your payslips and you’re not provided a p11d then you’re already paying the tax on it and don’t need to declare it again.

what is the car? Age and fuel type?

First q, is the benefit put through payroll or do you get a form P11d in July?

Hi the benefit is put through pay roll and I asked for a P11 rather than automatically being allocated one. So I put the cash equivalent from there for last year with a cash equivalent of £2543 as I only started paying in feb 2023.
worryingly payroll said, “if this information is not correct please send an email to our address detailing the revised info and we’ll investigate and issue another one if necessary “. Not v reassuring. I don’t see anything on my payslip about BIK being taken out. It’s a Volvo xc90 hybrid so partly chargeable. Not sure if I’m being double dipped on my tax as I’m now down another £350 pounds a month despite a pay rise (and was down £500 a month before that).

Car is new and as I say hybrid re petrol with BIK around £770

that cash equivalent seems high? What is the list price?

What’s the approved CO2 emissions and zero emissions mileage?

It’s a big car I know - list price on p11 £77000. Electric range is around 45 miles.co2 = 29 on plug in.

I get £1200 taken out of salary each month and then work sorts out the tax I believe through salary sacrifice. Should I be declaring in tax return?

Ring HMRC & speak to someone, they can explain how they have arrived at the BIK figure.

As the OP has said, the HMRC phone lines are out of action until September so she can't phone them.

HMRC self assessment lines are closed, you have to use the webchat.

OP I think you need to clarify with work how you are paying for it and the amount? You don’t do pay through salary sacrifice and p11d.

It depends on whether your salary sacrifice is pre or post tax. If post tax, then your contributions should be marked on the P11d to be deducted against the BIK value. If pre tax, then, yes, the BIK is taxable in full.

So the bik rate is 12% which would be £500 a month.

Is the money you're paying towards the lease, or is it the tax you're talking about?

Your BIK should go through the calculation. You can also use online tax calculators to check what tax you should be paying on your salary normally, and the added amount for the car on top.

The problem with company cars is that there's often a delay between you getting the car and starting to pay tax on it, so you're often behind, which leads to a period paying more tax than you otherwise would, possibly at a higher rate, while you catch up. And as you have found, it can be hard to know where you are. But if you log into your HMRC account and look back through your last few tax years, you might be able to work out where you are.

But anyway, the tax due is:

BIK value x % for CO2

eg 77000 x 0.12 = 9240

Then you can deduct any money you pay towards the having the car, you say you have £1200 taken out of your salary each month - is this for the lease? Surely not? But then if it's a £77k car, it might be right as 1200 x 12 x 3 for a 3 year lease is £43200, which could be right, especially if you're quite a high mileage driver and it includes maintenance, and possibly a contribution towards insurance.

Which leaves the amount that you pay tax on, but this would mean no tax is due as you're already paying more than the BIK.

But if the £1200 is not towards the car, I don't know.

But anyway, if you do still have a taxable benefit, this amount should be divided by 10 and deducted from 1257 to work out the effect on your tax code.

To work out the tax due, multiply the taxable benefit (before you divide by 10) by your marginal tax rate.

But going by the value of the car, and your comment about not having a personal allowance, it sounds like you're quite a high earner. In which case, it's probably worth asking an accountant for advice and to complete your tax return. It shouldn't cost very much (£1/200?) and at least you'll know you've paid the right amount of tax.

Your BIK should go through the calculation

Sorry, your PIID should go through the calculation.

If you don’t get any luck with hmrc you could employ an accountant to have a look

if you’re having to file a tax return presumably you have a very good salary

Hi the 1200 is the monthly I pay on the car. I took car lease out over 4 years. It’s like any other lease there will be a guaranteed value which I will either have to pay or take another lease out. My salary is reasonable (only has to submit tax returns past 3 years) but each time I submit I keep having to pay extra tax and monthly amount has decreased by over £1000 in the last 2 months alone. In the lease deal I get tax, insurance, servicing, MOT - essentially though I am buying the car like on any lease deal. The car isn’t being given to me as a free perk. My biggest question is how do I know if tax is being taken At source and if I need to declare further on the tax return. @barbaraofseville - sounds like you know a lot about. I’m suspecting all is done at source and the fact I asked for a p11 speaks volumes. May have to get that accountant.

Car BIK is really harsh especially as they keep taxing you on the purchase value however old the car is! My tax code has been up and down since I had BIK even though I get paid through PAYE and submit a P11D every year. They seem to like to tax me on what I might earn then give me the overpayment back rather than tax me on what I'm actually earning

Blobby10 yes - i just don’t understand where they’ve got £11,000 from? I had a colleague who said he got the car for tax reasons to pay slightly less in tax due to the salary sacrifice element.
and with it being an incentive for tax breaks until 2025 to get people going electric I’m not sure why I’m being taxed sooo much. I’m hoping that tax is taken at source so it’s not something I should have declared. Just wish I could have a discussion with someone in the tax office as payroll in my company won’t comment

The tax break is for full electric cars, hybrids for the most case are treated as the fuel they run on (with an allowance for the xero emissions mileage)

The tax due on it for the part of 22-23 that you had it, based on HMRC calculator is £760.80 for Feb and March (as a 40% tax payer)

Yes mine is a hybrid. On p11 my company put annual car benefit £78935*14% £11059 less reduction (for days not available) £2543 hence that figure on my tax code. But as I’m paying for the myself is it really a benefit?

No, I don't think it is a benefit.

When I had a company car, the BIK value was reduced by the amount I paid for the car. Are the payments you make towards the car shown on your P11D? That should go through the calculation.

Mine was something like - value of car £20k x 0.2 for the CO2 factor = £4000. I paid about £200 pm towards the car so £4000-£2400 = BIK of £1600. I'm a 20% taxpayer so my tax was £1600 x 0.2 = £320 per year or about £27 pm.

You can see more info at:

https://www.gov.uk/tax-company-benefits/other-company-benefits-youll-pay-tax-on

But if the CO2 factor is 14% and you pay £14400 per year towards the car, there shouldn't be any tax due, as you're paying more than the taxable benefit of around £11k.

hmm yes, as per @BarbaraofSeville if you're paying the lease yourself then it's not really a company car as such and so no benefit to declare - as you've paid for it yourself, is there anything completed in the 'amount made good' section?

Could be that there's been some confusion here regarding BIK and company cars, if you're paying for the lease via salary sacrifice it isn't a benefit and doesn't need to be declared as such - it's just a salary sacrifice scheme (DBro has one with the nhs)

What we need to know is whether the deduction from the wages to pay for it is gross (pre tax) or net (post tax). Without that, no one can make an informed opinion as to whether it's right to also put it on the P11d.