If you are earning just below the 40% tax threshold at say £31500 then you pay a 20% BIK on your company car and fuel. Say this currently costs £60 a month for the vehicle and £60 for the fuel.
You then get a pay rise of £1000 (£83.00 a month before tax) taking you over the threshold. You know pay 40% tax on everything above the threshold so in reality your additional take home pay would be £600 less NIC (£50 a month). On top of this you now have moved into the new tax bracket so have to pay 40% BIK on your company car and fuel which would equate to an additional £120 a month. This means you are paying an additional £1440 tax (BIK)a month on top of 40% on everything you earn above the threshold.
My question really is that you are going to need a substantial payrise (in the region of £3000) to make it worthwhile otherwise any increases in take home pay are going to be swallowed by additional tax and BIK on your company car.
Is this correct? I have simplified the figures and threshold but it doesnt seem right that a pay increase can you lead to you taking home less because of tax implications.
Thanks in advance for your help!