Benefit in Kind Company Vehicles 2023 Changes

Posted in Employment, Income Tax, Taxation

From 1 January 2023, to encourage the use of electric vehicles and lower emission cars, the BIK on company vehicles moved to a CO2 based system.

However the law of unintended consequences applied and as a result many employees with company vehicles have experienced large increases in their income tax liabilities in 2023.

The Government introduced a temporary measure in the Finance Bill 2023 to ease the financial pressure on families and businesses due to the recent cost of living increases.

This relief will apply for 2023 only.

Company Cars

The Original Market Value (OMV) of cars in Category A-D, will be reduced by €10,000 which will consequently reduce the BIK charge.  This reduction is not applicable to cars in Category E.

The upper limit in the highest mileage band will also temporarily reduce by 4,000km (See Table A).

Table A – The NEW amount of 2023 business mileage and CO2 emission category:

Lower LimitUpper LimitABCDE
KilometresKilometres%%%%%
26,00022.526.253033.7537.5
26,00139,0001821242730
39,00148,000*13.515.751820.2522.5
48,001*910.51213.515

*temporary reduction from 52,000kms

Table B – Car CO2 emissions category:

Vehicle CategoryCO2 Emissions (CO2 g/km)
A0g/km up to and including 59g/km
BMore than 59g/km up to and including 99g/km
CMore than 99g/km up to and including 139g/km
DMore than 139 g/km up to and including 179g/km
EMore than 179g/km

Example:

An employee has the use of a car provided by the employer for all of 2023 which produces 75g/km in CO₂ emissions so the car is in Category B. Expected  business mileage in 2023 is 47,000 km. The OMV of the car is €35,000. The OMV will reduce to €25,000 under the new relief.

BIK Calculation: Cash Equivalent (OMV) €25,000 x 15.75% = €3,937.

Without the temporary measure, the BIK calculation would have been €35,000 X 15.75% = €5512.

This is a fall in notional pay of €1575.

Company Vans

The temporary changes applies also  to company vans. The cash equivalent for vans will be calculated at 8% of the OMV, with a €10,000 reduction in the OMV.

Electric Vehicles

Electric vehicle users existing deduction of €35,000 will be increased by €10,000 so the cash equivalent is calculated on the actual OMV reduced by €45,000.

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