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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15916
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I earn just over the £43k tax bracket so I pay 40% on a

Resolved Question:

I earn just over the £43k tax bracket so I pay 40% on a small portion of my income. I have been told that this means when I get a company car this means I will have to pay the 40% rate, even though I pay 40% tax on only a few thousands of my salary.
This cant be right surely.....that would mean that if you earned £41k and got a 1% payrise, if you had a company car you car tax would double and you would be worse off
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi.

I'm afraid that if you earn over £43,000, you will pay tax at 40% on your car benefit. All benefits are converted to a cash value for tax purposes. If that benefit wasn't simply tagged onto your income, employers would find all sorts of ways to pay employees in non-cash ways as they did in the 1980s when some employees were paid bonuses in gold or precious stones which they could sell for cash, to avoid national insurance contributions.

It's your choice as to whether you have a company car or not and you need to be aware of the tax implications if your tax rate changes for whatever reason. You could pay pension contributions to bring down your taxable income level or the amount chargeable at 40% to mitigate the problem.

I hope this clarifies your position but let me know if you have any further questions.

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