BIK car for Director earning less than £8,500?

BIK car for Director earning less than £8,500?

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I'm a CIMA qualified accountant so know the basics, but I'm not sure about this one as it seems a little too good to be true.

I work as a contractor for various businesses and will be limiting how much I pay myself this year as I plan to live on savings and build up the cash in my business. Anyway, the family car I use has pretty much died and I need a replacement. I've been thinking about buying it through my company but I have been in two minds due to the BIK.

Anyway, I've been reading that employees (does that include directors?) do not have to report BIK if earning less than £8,500. I remember bits and pieces from my exams but I know legislation changes and it was some years ago that I looked at tax. Am I simply able to pay myself below theshold negating the BIK?

Many thanks in anticipation.

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By Richard Willis
20th Oct 2012 19:23

Unless it has changed since I last had to do it

the BIK applies to directors AND employees earning > £8,500 p.a.  I am sure someone will confirm whether this is still the case.

p.s. I seem to remember that the original term was 'directors and other highly-paid employees' and when it was first set at £8,500 that was the pay, in my company at least, of a senior manager!  It's not even the NMW now.

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By imbs
20th Oct 2012 19:23

Yes richard
I'm pretty sure it's a bik to directors no matter what salary you are taking

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By mhtax
20th Oct 2012 19:59

Total income including value of BIK

When you look at the tax liability for benefit purposes you have to include the value of the benefit to see if your employee earns over £8,500.

Directors do have a taxable benefit regardless, but there is nothing to stop the benefits being the only earnings - thus not paying tax on the benefits.

Provided the company is profitable enough to pay you dividends to live on that would work but the company would of course pay NIC (Class 1a) on the benefit.

The alternative, which I assume you are doing at the moment, is to claim businees mileage back from the company at 45p/25p as appropriate  

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By User deleted
20th Oct 2012 22:37

Depending on the car ...

... and how you are financing it, if you have low business miles the BIK may be worth it for the tax savings in the company if you need a loan or HP!

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By petersaxton
21st Oct 2012 01:42

All directors

P11Ds apply to all directors as well as employees earning over £8,500 after including benefits in kind.

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Woolpit Gus
By nutwood
22nd Oct 2012 13:27

All directors? Not quite

Directors who are paid less than £8,500 and have no material interest in the company and who are either full time working directors or where the employer is a not for profit business or charity are not subject to BIK on a company car. http://www.hmrc.gov.uk/manuals/eimanual/EIM20007.htm

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