Benefit In Kind Effect on Tax Code

I have been having issues with my tax, and so I am trying to work out how a company car benefit in kind is calculated and have been told the following by HMRC: 1. Company Car Benefit In Kind is added to your salary for calculating tax; and 2. It is also deducted from my Personal Allowance, which is reflected in your tax code. Is this correct? If so, the overall effect seems to be multiplied? Surely only one or other should apply? As an example, see below: Scenario 1: Salary = £35,000, no company car. Personal Allowance = £12,570 (tax code of S1257L in Scotland) Taxable Income = £22,430 Tax = £4,486.00 (keeping it to basic 20% tax instead of Scottish tax) Scenario 2: Salary = £30,000 Company Car BIK = £5,000 BIK Total 'Income' = £35,000 Personal allowance = £7,570 (tax code of S757L in Scotland) Tax = £5,486.00. In each scenario, the total package is worth the same, but in Scenario 2, your tax burden is increased by £1,000. Is this correct?

Hi sfarrelly,
It would depend if the employer is payrolling the benefit or not.
If payrolling then the car benefit in kind is added to the salary and taxed and would not then be shown as a deduction in your tax code.
If not payrolled then it would be shown as a deduction in the code to collect the tax. 
Thank you. 

Thanks @HMRC Admin 25 , I think that answers my query. My Employer is not payrolling the company car, so it should be an adjustment to my Personal Allowance/Tax Code, not added to salary as well.

Can anyone explain how much this would affect my tax each month, it is on a salary sacrifice scheme and my current tax code is K319 this is the quote for a new electric car Monthly gross reduction:£784 Income Tax saving:-£147 National Insurance saving:-£63 Pension contribution saving:-£51 Benefit in Kind:+£16 Effect on take home pay:£539

Hi dmk236 kirk,

It would depend on what tax band you are on. You can check the tax bands at:

Income Tax rates and Personal Allowances

You can also contact our Income Tax team to check this for you.

Income Tax: general enquiries

Thank you.

Hello, My employer currently payrolls BIK car tax as opposed to applying a reduction to my tax code which would significantly reduce my tax burden as my salary is just underneath the 40% tax limit at £49,600. My question is can I request a change from HMRC to my tax code myself providing my BIK vehicle statement so my employer doesn't apply as payroll?

Hi
Unfortunately, you would need to discuss any changes to the payrolling of your car benefit with your employer.

Thanks, I understand