Be aware of BIK changes for company vehicles – Upcoming changes to BIK rules in 2023 for company cars and vans
Summary of changes that apply from 1st January 2023
- The calculation of the BIK due on a company car (Petrol/Diesel/Hybrid) will now take account of the vehicles CO2 emissions. Basically vehicles with higher emissions will attract a higher rate of BIK.
- For company vans where the employee has private use of the van, the rate of BIK is increasing from 5% to 8%.
- The relief allowed for fully Electric Vehicles is being reduced from €50,000 to €35,000 in 2023 followed by a further reduction to €20,000 in 2024 and finally in 2025 to a reduction of €10,000.
In order to ensure that BIK is calculated correctly in 2023 many employers will be required to gather information on their vehicles CO2 emissions and provide it to their payroll processor.
It is very important for employers to ensure that the correct CO2 data is held. This will ensure that the correct rate of BIK can be applied in payroll calculations.
New CO2 based method of calculating BIK on company car
This new method applies to all petrol, diesel and hybrid cars from the 1st January 2023. It also applies to Fully Electric vehicles (EV), which are typically Category A (zero emissions), but there is an allowed reduction of €35,000 on the Original Market Value (OMV) of the EV in 2023 (previously €50,000). Each vehicle will belong to one of five new categories (A to E) depending on their CO2 emissions, with Category A having the lowest set of rates, and Category E having the highest set of rates.
The specific categories are as follows;
Vehicle Category A – CO2 Emissions (g/km) Category A 0g/km up to and including 59g/km
Vehicle Category B – More than 59g/km up to and including 99g/km Category C More than 99g/km up to and including 139g/km
Vehicle Category D – More than 139g/km up to and including 179g/km
Vehicle Category E – More than 179g/km
Once you have determined which category that the vehicle belongs to, the annual mileage is then used to select the relevant rate of BIK based on the following table of rates
Electric Vehicles are also included in the changes for 2023.
The treatment of Electric Vehicles for BIK purposes has varied over the years, and currently only EV’s with an Original Market Value (OMV) over €50,000 are chargeable to BIK, and then only on the excess amount over the €50,000 threshold. In 2023 this threshold is being reduced to €35,000 such that any EV with an OMV in excess of €35,000 will now be subject to BIK on the excess amount over the €35,000 threshold