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I live and work in the UK I'm confused at the amount of the tax I will have to pay on this benefit in kind.

Say I earn £50k, and have a benefit in kind for travel which is £2000 (for a yearly season ticket). Will I pay 40% (the higher rate) or 20% tax on this benefit in kind?

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As another answer mentions, but including here to make this complete: benefits in kind are taxed as part of income unless there's a special exemption.

Note that if you are getting a repayable loan you don't have to pay any tax at all, even on the fact that the loan is interest-free. There is a special exemption for interest-free loans up to £10k from your employer to buy a season ticket. It's only if they are handing you the season ticket outright that it's taxable.

If you are getting it paid for, then all income between approximately £43k and £150k is subject to direct tax at 40%, so that's what you would pay. However, you should generally be exempt from the 2% national insurance employees have to pay on normal income. Your employer will still have to pay employer's national insurance, but that's not your direct concern.

In addition, if you or your partner gets child benefit and you are the higher earner, you will have to repay some of that. At the precise numbers you mention (£50K income + £2K extra), the £2K will lead to you having to repay 20% of the total child benefit payments.

This extra "tax" applies only to incomes of between £50k and £60k where you are the higher earner: at £50k you get all the child benefit, at £60k you get none (or have to repay it all in your tax return), and in-between you repay some of it on a taper.

Child benefit is approximately £1k for the first child and £650 for subsequent children, making the cost to you approximately £200 for the first child and £130 per subsequent child.

Another way of looking at that taper is that for income between £50k and £60k, you pay 10% extra tax if you have one child, 16.5% if you have two children, etc.

Particularly if the child benefit withdrawal affects you, do make sure to take advantage of everything that can reduce your taxable income. For example, your employer may offer childcare vouchers tax-free. If you make donations to charity via gift aid, private pension contributions, or anything else that is deductible from tax, make sure to declare them on your tax return.

  • Note that childcare vouchers are soon to be replaced with Tax-free Childcare, which, depending on your circumstances, may be worth a lot more. – Steve Melnikoff Mar 30 '17 at 8:09
  • @SteveMelnikoff Yeah, but no higher-rate relief on that (AFAIK) so I tried to keep things simple by omitting it. – Ganesh Sittampalam Mar 30 '17 at 8:10
  • @SteveMelnikoff and if you're already enrolled in a CCV scheme you can stay on that system if you want – AakashM Mar 30 '17 at 10:55
  • I'm not sure you're right about "you should generally be exempt from the 2% national insurance employees have to pay on normal income". Although the question says " benefit in kind " it then goes on to say " which is £2000 ". If the asker is getting cash, it's NIable isn't it? – AakashM Mar 30 '17 at 11:04
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You'll pay 40% (unless you have a lot of allowances, taking your taxable income below the higher-rate threshold). The imputed income from the benefit in kind is simply added to your total income, taking it from £50K to £52K. Since the extra £2K is above the higher-rate threshold, it's taxed at the higher rate.

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