Just wanting to clarify the tax situation on assessable benefits in kind, namely a company car. Without going into the technical details of emissions etc, I just want to know how the benefit is taxed?
My way of thinking is that if you have someone earning £30,000 a year and they receive a car as part of the job and the assessable benefit of that car is, say, £6,000, will that be recorded on the P11D at the end of the tax year and then that person's tax code is adjusted down the following year? So, somebody on a standard code of 647L would have that revised down to 47L the following year?
If this is the case, tax on car benefits are presumably always a year in arrears? Could you notify the tax office sooner and have the tax code adjusted in year?
There would be employees tax on the assessable benefit, but not employees NI? The only NI would be employers Class 1A?
Thanks in advance, just trying to get the way this kind of benefit is taxed straight in my own mind.
Yes you are correct in a sense, it is usually taxed via the PAYE Tax Code at the relevant rate ie 20% 40% etc...
Yes the benefit is recorded on form P11d at the end of the year, copy to employee and copy to inland revenue along with form P11d(b).
Yes the tax payable is a year in arrears, although you can notify the inland revenue at the beginning of employment or when receiving the benefit for the 1st time that the BIK will be x amount and they can amend the tax code, but you have to make sure the benefit is correct, but they may not always amend the code. If there are any differences, such as benefit under declared, then the following year the employee could pay more tax the following year.
There is no Employee's NI on the benefit, however Class 1A is payable by the employer on the total benefit for all employees (this is disclosed on the P11d(b) form) so basically the employers pays the additional NI.
