The car benefit tax detailed within your quotation is for information only; for further details, please request a call-back from the menu bar or seek independent advice.
If you receive a salary from your employment you pay income tax through the PAYE system. If you receive goods or other non-cash items, you are receiving a "benefit in kind" which is taxable. A car that is provided by your employer whether by salary deduction or salary sacrifice is classified by the HMRC as non-cash income. The "benefit in kind" value of the car is calculated by multiplying the list price of the car by the CO2 percentage.
Each year HMRC publish a table of emission values that equate to a CO2 percentage figure the current tables are applicable to April 2019.
N.B. the percentage values apply to petrol engine, there is an additional 4% supplement for diesel engines, however this is capped at 37%. If your diesel engine meets the Real Driving Emissions 2 (RDE2) standard the supplement will not apply.
Payments made by salary sacrifice are a salary swap and not payments for the private use of the car. Therefore, the tax calculation is List price x CO2 % x tax rate
e.g. £20,000.00 x 15% = £3,000.00 x 20% =£600 per annum
Payments made by salary deduction are classified as payments for the private use of the car and HMRC discounts the Car Benefit Charge by the value of the private use contribution. Therefore, the tax calculation is List price x CO2 % - private use contribution x tax rate.
e.g. £20,000.00 x 15% = £3,000.00 - £1,000.00 = £2,000.00 x 20% = £400 per annum
Is the car benefit tax included in my payment for the car?
No, it is a separate payment to the HMRC - The tax is collected through the PAYE system in one of two ways.
1.Via an adjustment to your personal tax code. The HM Revenue & Customs will reduce your tax code by the value of the benefit. This simply means that, if you pay tax at the standard rate, the tax you pay will increase by 20% of the car benefit. When you apply for a quotation we will calculate the tax charge for you and we will inform the HM Revenue & Customs, to adjust your code, if you take a car under the scheme.
2. By payrolling. There will be no change to your tax code, but your employer will collect the applicable tax from your pay each month and this will be paid to the HMRC. You will see a payslip note detailing the amount that has been taxed (please note this is not the amount of tax you pay, but the amount on which tax is applied)
The method used will depend on your employer, if you are unsure of the method your employer uses please call Knowles Associates.