I have read the HMRC guidance. Apologies, I’m a gimlet brained imbecile.

If you go into the 40% tax band by a small amount, say £200, do you then jump up to the full 40% tax liability on your company car?

or

is there a pro-rata system for the %age above and below?

Is it the same for the bike to work scheme?

The car benefit gets added to your income, so if it was just £200 into the band of 40%, you’d only get billed 40% on that £200. The rest would be at the lower rate.

thank you, clear and concise, you should get a job at HMRC.

Bike to work is effectively pro-rata. In your example the first £200 would save 40%, the remainder would be at basic tax rate. No idea what happens if you have a company car and a C2W though.

tax rate. No idea what happens if you have a company car and a C2W though.

Suspect the HMRC computer would blow up. Don’t confuse them.

Doing both would actually help you as the C2W money you wont earn (from a tax perspective) which will lower your taxable salary which will mean that when your company car benefit is added in you may remain in the lower tax band.

Depends on how you ‘pay’ for the co-car as well. Mine is deducted from my salary pre-tax, so I save a chunk of National Insurance and income tax on that money. And that chunk is roughly the BIK on the car I chose…

Pictonroad

Do you have a car allowance or company car?

If you have a company car and are in the 40% bracket, you will pay the higher rate on your car

eg Car £20k , CO2 band = 18%

You will pay £20,000 x 18% x 40% = £1,440 pa

As I understand it, it doesn’t matter how much you are over the 40% bracket

I thought it was independant of your tax status, they calculate the benefit the car is to you based on value and emissions. This then knocked off your personal allowance. That may mean you pay 40% on salary you wouldn’t have, e.g. if the benefit is calculated @ 4k you’d start paying 40% on earnings over around £38.5k rather than £42.5k.

You will pay £20,000 x 18% x 40% = £1,440 pa

As I understand it, it doesn’t matter how much you are over the 40% bracket
Not quite.
£20k x 18% will be the taxable benefit = £3600.
Using OP’s numbers, if his pay comes to £3400 below the 40% band, that £3400 will be taxed at 20% and he’ll only pay 40% on the £200 falling into the 40% band.

Glad I take the cash.

car tax calculator
All the answers and a calculator for the exact figures.

Oldbloke I think we’re saying the same thing.

molgrips, taking the cash can be costly depending on your circumstances. I did a load of calcs before taking the car, yes my take home pay is probably down £500 per month compared to taking the car allowance but I’d not be able to afford a taxed, maintained and insured car of anything like the value that I’ve got for £500. Also if your base is between 50k to 60k your car allowance eats into your child benefit if you’re eligible.

If I wanted a new 5 series then the car option would be much cheaper. However given that I’m happy driving around in the now famous Passat I’m very much ahead.

As I understand it, it doesn’t matter how much you are over the 40% bracket

Probably best then you don’t give tax advice…

Stumpyjon – can you explain the bit where you mention child benefit please? I currently have a company car with a P11d value of around £6k, if I opt out I’ll get around £500 a month so basically the tax should cancel each other outout?