Significant Changes to Benefit in Kind (BIK) on Company Vehicles from 1 Jan 2023
Significant Changes to Benefit in Kind (BIK)
As part of the government’s climate action plan to lower emissions, there are some changes to the rules for calculating BIK on motor vehicles which are due to come into effect from January 1, 2023. These changes may increase costs for both employers and employees where the vehicles are in the higher CO2 emission bracket
The new rules will apply to all motor vehicles (including electric vehicles) whether the vehicle is acquired in 2023 or made available to employees in earlier years of assessment
Changes to BIK on Company Cars
Currently, the BIK on company cars is based on the OMV (original market value) of the car and the mileage.
From January 1 2023 BIK on company cars will be determined by the business mileage undertaken and the vehicle’s CO2 emissions.
Table 1:
| Vehicle Category (1) | CO2 Emissions (CO2/g/km) (2) |
| A | 0g/km up to and including 59g/km |
| B | More than 59g/km up to and including 99g/km |
| C | More than 99g/km up to and including 139g/km |
| D | More than 139g/km up to and including 179g/km |
| E | More than 179g/km |
Table 2:
| Business Mileage | Vehicle Categories | |||||
| Lower limit (1) | Upper limit
(2) |
A
(3) |
B
(4) |
C
(5) |
D
(6) |
E
(7) |
| Km | Km | Per Cent | Per Cent | Per Cent | Per Cent | Per Cent |
| 0 | 26,000 | 22.5 | 26.25 | 30 | 33.75 | 37.5 |
| 26,001 | 39,000 | 18 | 21 | 24 | 27 | 30 |
| 39,001 | 52,000 | 13.5 | 15.75 | 18 | 20.25 | 22.5 |
| 52,001 | 9 | 10.5 | 12 | 13.5 | 15 |
Where an employee has the use of a car provided by his/her employer on 01/01/2023, the OMV (original market value) of the car is €35,000. The car produces 130g/km in CO2 emissions (per Manufacturer). The actual business kilometres in the year were €42,000 kilometres, 130g/km in CO2 emissions puts the car in vehicle category C as per Table 1. As the employee drove 42,000 kilometres in the year, the case equivalent is equal to the OMV x 18% (Table 2)
BIK Calculation from January 2023:
€35,000 x 18% = €6,300
Changes to Benefit in Kind (BIK) on Electric Vehicles
The Benefit In Kind (BIK) regime is also changing for electric Vehicles. Under the current rules if the electric vehicle’s OMV (Original market value) 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 01/01/2023, this will be changed for an electric vehicle made available for an employee’s private use during the years 2023-2025, the OMV of the vehicle is reduced by €35,000 in 2023, €20,000 in 2024 and €10,000 in 2025. The threshold will gradually reduce to zero by 2023.
If the reduction reduces the OMV to Nil, a BIK charge will not arise. Any portion of OMV remaining, after the reduction is applied, is chargeable to benefit in kind at the prescribed rates
Example
An employee has the use of an electric company car on January 1, 2023. The OMV of the car is €80,000. The car produced 50g/km in co2 emission. The actual business kilometres in the year were 24,000 kilometres. 50g/km in CO2 emissions puts the car in vehicle Category A as per Table 1 above.
As the cars which will be made available are electric cars, they will generally be Category A vehicles
The below examples detail the effect of the tapering relief and change in BIK changes for employees over the next 4 years
| Year | 2023 | 2024 | 2025 | 2026 |
| Original Market Value | 80,000 | 80,000 | 80,0000 | 80,0000 |
| Tax-Free Threshold of OMV | 35,000 | 20,000 | 10,000 | 0 |
| Taxable OMV | 45,0000 | 60,000 | 70,000 | 80,000 |
| BIK Rate to be used | 22.5% | 22.5% | 22.5% | 22.5% |
| Cash Equivalent of use of Electric Car | €10,125 | €13,500 | €15,750 | €18,000 |
Changes to Benefit in Kind (BIK) on Company Vans
For the tax year 2023 and onwards, the cash equivalent for vans will increase from 5% to 8% of the original market value (OMV)
Employers who provide cars or vans to their employees will need to review the treatment of these benefits in advance of the first pay dates in 2023. 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. If the company vehicle falls into the higher emission bands, it may be time to consider purchasing smaller cars or electric cars
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