I’ve done quite a bit of research but struggling to find out exactly the answer to my current company car question.

Just about to get my new car in a few weeks and still trying to figure out the impact.

I understand how BIK is calculated and how it depends on normal or higher rate, however how does this work when you get close to the limit?

I think my new car, other benefits and current salary will be right on the limit for 40% tax bracket.

So will my new tax code be for the car at 20%BIK or will it go to 40% if puts me over the limit or is there some kind of sliding scale?

Hopefully someone knows and can help. HR have been a bit useless!

Thanks

You may 20% up to the 40% cut-off and 40% over that.

You pay 0% up to the tax free limit.
You pay 20% on the bit from the tax free limit to the 40% limit.
You pay 40% on anything over the 40% limit.
So if your salary is £1.00 over the limit you only pay 40% on the £1.00 that is over the limit,
Close doesn’t come into it.

I’ve just realised I’m an idiot. The BIK is always the same and then I’ll just pay the extra tax on any earnings that are eligible for 40% tax yes?

I was thinking the BIK changes at 40% but it’s always the same it’s just the tax you pay on the earnings!

Deductions first, so the company car comes off the lower tax bracket and then salary comes off the higher.

The reason the bik figures are quoted as 20/40% is that in the real world a 40% tax payer does pay that on the car – but if your borderline then no just being in the bracket by a quid doesn’t mean you pay double tax on all your benefits.

http://comcar.co.uk/newcar/companycar/taxcalc/