What is the new BIK relief?

From 01 January 2023 the rules for calculating Benefit-In-Kind on a motor vehicle changed. The new system of calculating BIK takes into account a vehicle’s CO2 emissions. This means that employees with bigger cars saw an increase in the amount of BIK paid in January that effectively reduced their take home pay.

 

What is the new relief?

Due to the continuing cost of living crisis the government have announced a new relief to offset this. 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. 

Read more about CO2 bands for vehicles here

 

How will it work?

BIK on company cars is based on the OMV (original market value) of the car, the mileage and a vehicle’s CO2 emissions.

The new relief means that, for the purposes of calculating BIK liability, employers can reduce the OMV by €10,000 in order to reduce liability.

Read more about calculating BIK in our comprehensive guide here.

 

What if I have a van?

You can also reduce the original market value of your van by €10,000.

 

What about electric vehicles?

For electric vehicles, the €10,000 reduction on the original market value will be in addition to an existing relief of €35,000 that is already available for EVs, bringing the total relief for 2023 to €45,000.

 

When will the relief take effect? 

Once the next finance bill is passed this relief will come into effect and will be backdated to January. It is expected the relief will be in place until the end of 2023.

 

Date published 21 Mar 2023 | Last updated 21 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.