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Help! Any accountants or tax savvy mumsnetters about?

4 replies

nothernexposure · 15/11/2021 23:20

Got an unwelcome letter from HMRC today letting me know I've under paid my tax last year. Apparently the value of my lease car wasn't properly taxed and I now owe over 1k. So my question is, on the P11D form, how is the 'cash equivalent or relevant amount for each car' calculated? I swapped cars half way thro the tax year and the cash equivalent is over double for the new car despite it being a similar list price. Is it because it's brand new and will be lower next year because of depreciation (but never had that before!) or is possible there's been a mistake?? Any ideas would be great. Thank you

OP posts:
BarbaraofSeville · 16/11/2021 07:39

This is a common problem with company cars. It takes months between getting a new car and you starting to pay the correct amount of tax, because the change is not reported until well after the end of the tax year.

The value is calculated by the list price, multiplied by a factor dependent on the emissions - the P11D should show the workings of this. This is the same for the whole time you have the car, there is no deduction for depreciation. If you pay towards the car for private use, that is deducted and conversely, if your employer pays for your private fuel, you are taxed extra for this.

So for example, if you got your new car in November 2020, you say the cash equivalent was double, because the emissions were higher?, so you would have owed more tax from the date you got your new car, but HMRC won't have known about it until your employer sent in the P11D, which won't have been until April 2021 at least, and could even have been as late as the end of June this year.

So you had underpaid tax for several months after November 2020, hence your tax bill for arrears and the fact that you are now paying more each month going forwards due to the ongoing higher cost of your company car. Another consideration is that if you earn around £50k, you could also get tipped into higher rate tax, making it even more expensive as you are taxed at your marginal rate. But you can pay it by adjusting your tax code, so at least it will be spread out over the rest of the tax year.

I don't have a company car any more, but what I did find was that, when I sent my last car back, I was able to log into my tax account and tell HMRC straight away that I no longer had the car, so I wasn't being overtaxed, as it would have been nearly a year before my employer told them this via my P11D. So in future, you can self report, so arrears or overpayments don't build up like this.

nothernexposure · 16/11/2021 16:37

Thanks @barbaraofSeville that's really helpful. The CO2 emissions are slightly higher at 127 g/km vs 99 g/km previously. A hike of nearly 3k in the cash equivalent figure does still seem quite a hike tho! I think I need to ring payroll to get them to explain the calculations in really basic terms as there's no other info on the P11D to explain the calculations.

OP posts:
imnottoofussed · 16/11/2021 16:43

This may help

www.gov.uk/calculate-tax-on-company-cars

nothernexposure · 16/11/2021 17:12

Thanks @imnottoofussed interestingly the car benefit charge is over 2k less using that website, so I clearly need to ring payroll to get them to explain and help me.

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