40% Tax / Car Questions

[507bhp]

How will the amount of tax I pay change once I breach the 40% mark. Currently my car attracts a £4441 BIK so around the £888 mark @ 20%. Is ALL of the Benefit in Kind chargeable at the higher rate??

My word, I hope it isn't!!!!

[LC23]

It will only be the balance of the benefit in kind figure which takes your income over the higher rate band which will be taxed at 40%.

[Sam_68]

^^^ What he says.

But yes, if your basic salary takes you into the 40% tax bracket, then you will pay 40% on the BIK (and fuel benefit, if you get free fuel).

[Deva Link]

The BIK value is simply added to your current gross salary, and whatever is over the 40% threshold (after deducting your personal allowance) is taxed at 40%.

So if your salary goes up enough, you could end up doubling the amount you pay for the car.

This is why is makes much more sense for people in the 40% bracket to opt out of company cars than it does for those paying tax at 20%.