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Correct grossing up of net car benefit

Correct grossing up of net car benefit

I am looking at the way our company report to our clinet's payroll depts for payment of car benefits to their employees.

The employee needs to end up with a given net figure each month. Lets say £340 for this example.

Assuming the driver pays tax at 40% and NI at 1%, I would expect the grossing up to be as follows:

£340 net, gross up for PAYE @ 40%

£340 x 100/60 = £566.66

Gross up fo NI @ 1%

£566.66 x 100/99 = £572.39

Then apply 12.8% EmployERS NI to this. Job done!

Now, is that it? OR, is the employEES NI (£5.72 in this case) subject to extra PAYE? i.e., is the paying of the employers during the grossing up for NI deemed to be a benefit in kind to the employee?

I have had differing opinions on this and I need it sorting.


John FM


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By ACDWebb
15th Oct 2008 17:12

Is the employer paying the EE's NI?
Surely you are working back to what the gross needs to be to arrive at a net of £340 so is it not £340 x 100 / (100-41) = £576.27

£576.27 x 40% = £230.51
£576.27 x 1% = 5.76
Total £236.27

Net £576.27 - £236.27 = £340

Ers £576.27 x 12.8%

Or have I missed the point?

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