As the proprietor of a business, some of my employees have access to company-owned automobiles. I have received word that the regulations for determining the benefit-in-kind on these vehicles are scheduled to be altered. 

What should I be aware of?

As part of the government’s plan to reduce emissions, modifications have been made to the regulations for determining the non-cash compensation for motor vehicles.

As of January 1, 2023, the regulations for determining BIK on company vehicles will be revised. These revisions will apply to both current company cars and those provided to employees in the future.

 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

A car with a value of €25,000, travelling 25,000 business kilometres per year, and emitting 75g of CO2 per kilometre, would have a BIK charge of €6,000 under the current system. Under the new system, it is placed in band B with a tax amount of approximately €5,250, a reduction of €750.”

Example 2 – Car in Band D

The current BIK charge for a car worth €35,000 that does 30,000 business kilometres per year and emits 151g CO2 per kilometre is €8,400. However, under the new regime, the car will fall into band D, and the BIK charge will increase to approximately €9,450, a rise of €1,050.

What is the method for determining the band of my car?

Car bands are determined by the CO2 emissions of the vehicle:

Are the BIK regulations altering for Electric Cars?

 The BIK system is also being adjusted for electric cars (EV).

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

However, starting this year, there will be a change. 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 regulations for Company Vans change? 

The rate for vans also increased from 5% to 8% from 01 January 2023.

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 to consider purchasing smaller cars or electric cars.

Date published 13 Oct 2022 | Last updated 12 Jan 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.