Insights

Government Announcement: Temporary BIK Tax Change for Company Vehicles

Earlier this year we gave an update on the changes to the Benefit-in-Kind (BIK) on Company Vehicles which came into effect from 1^st January 2023.

Earlier this month, the Government announced a temporary change to the Benefit-in-Kind (BIK) tax changes which were previously introduced.

The original changes saw the Benefit-In-Kind system become more CO2 based to facilitate the move towards lower emission vehicles and to encourage the use of Electric Vehicles. However, for a significant proportion of motorists it resulted in a significant increase in their income tax liabilities because of these benefit-in-kind changes. This, combined with increased fuel, energy and cost of living increases, has caused hardship for many employees.

This change will involve a temporary relief of €10,000 to be applied to the Original Market Value (OMV) of cars within the A-D Categories to reduce the amount of BIK payable . The change will also apply to Vans and to Electric Vehicles, the reduction for EV’s will be in addition to the existing €35,000 relief. Vehicles in the E category will not be included here as these are vehicles with the highest emissions.

The Minister has stated that the change will be temporary, it will be applied retrospectively to 1^st January, 2023 and will only be applicable until 31^st December, 2023.

This change was published as part of the Finance Bill 2023 which is designed to assist businesses, employees and families alike in managing amidst the current rising energy prices and the cost of living crisis. 

Table 1:

Table 2:

Example 

John, an employee has the use of a car provided by his employer on 01/01/2023, the OMV (original market value) of the car is €40,000.

• The car produces 130g/km in CO2 emissions (per Manufacturer). 130g/km in CO2 emissions puts the car in vehicle category C as per Table 1.
• The actual business kilometres in the year were 50,000 kilometres. As the employee drove 50,000 kilometres in the year, the case equivalent is equal to the OMV x 18% (Table 2).

BIK Calculation from January 2023:

€40,000 x 18% = €7,200

REVISED BIK Calculation

( €40,000 – €10,000 ) X 18% = €5,400

Example

Mary, an employee has the use of an electric company car on January 1, 2023. The OMV of the car is €70,000.

• The car produced 50g/km in CO2 emission. 50g/km in CO2 emissions puts the car in vehicle Category A as per Table 1 above.
• The actual business kilometres in the year were 25,000 kilometres.