Are there changes to the Company Vehicle BIK rules?

As part of the government’s Climate Action Plan to lower emissions there are some changes to the rules for calculating Benefit-In-Kind on motor vehicles.

 

When will the rules to BIK on company vehicles change?

From 01 January 2023 the rules for calculating BIK on a motor vehicle will change. 

The changes will apply to existing company cars as well as new cars provided to employees.

 

What are the changes to the Company Vehicle BIK rules?

Currently the BIK on company cars is based on the OMV (original market value) of the car and the mileage.  

From 01 January 2023 the new system of calculating BIK with also take into account a vehicle’s CO2 emissions.

There will be five emissions bands from A, which is the lowest, to E, the highest.

For those with company cars in the A & B bands the increase in BIK may not be significant but those in high bands may see a significant increase in the BIK that need to pay.  

Example 1 – Car in Band B

Currently, a car worth €25,000 doing 25,000 business kilometres per annum and emitting 75g CO2 per kilometre would have a BIK charge of €6,000.

Under the new regime, the car will come in at band B and the tax amount will be around €5,250, a decrease of €750.

Example 2 – Car in Band D

Currently, a car worth €35,000 doing 30,000 business kilometres per annum and emitting 151g CO2 per kilometre would have a BIK charge of €8,400.

Under the new regime, the car will come in at band D and the tax amount will rise to around €9,450, an increase of €1,050.

 

How do I know what band my car is in?

The bands for vehicles are based on the car’s CO2 emissions: 

Are the BIK rules changing for Electric Vehicles?

The BIK regime is also changing for electric vehicles (EV). 

Under the current rules, if the electric vehicle’s OMV does not exceed €50,000, then no BIK arises. Where the electric vehicle costs more than this, the OMV is reduced by €50,000, to calculate the BIK.

However, from January this will be changed. In 2023 there will be a reduction to €35,000, €20,000 in 2024 and €10,000 in 2025. The threshold will gradually reduce to zero by 2026, with a new BIK rate of up to 22.5% being applied. This will still be lower than the top 30% BIK rate for internal combustion engine vehicles.

 

Will the BIK rules for Company Vans change?

The rate for vans is also due to increase from 5% to 8% from 01 January 2023.

 

What should you do?

Employers who provide cars or vans to their employees will need to review the treatment of these benefits in advance of 1 January 2023 to determine the impact of the changes. They should contact their payroll administrator to make sure the correct amount of tax is paid from January. 

It would also be a good idea for employers to make their staff aware that there will be changes and they will notice this in their payslips from January.

If the company vehicles fall into the higher emission bands, it may be time consider purchasing smaller cars or electric cars. 

 

BIK Tax Relief for 2023

The government have announced that due to the continuing cost of living crisis a new relief will be introduced for BIK on company vehicles. A relief of €10,000 is set to be applied to the original market value of vehicles in categories A, B, C and D to reduce the amount of income tax that an employee is required to pay for its use. There is no relief for cars in band E, the cars with the highest CO2 emissions.

For electric vehicles, there will be a further €10,000 reduction on the original market value used for calculating BIK. So in 2023, for electric vehicles with an OMV of €45,000 or less no BIK arises. 

For vans you can also reduce the original market value by €10,000.

 

 

Guide to BIK on Company Vehicles

For more information on calculating BIK on company vehicles you can download our comprehensive guide here 

 

Date published 13 Oct 2022 | Last updated 22 Mar 2023

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.