How does Ireland's new BIK system work?

The benefit-in-kind setup for taxing company car use has just changed in Ireland, dramatically so.
Neil Briscoe
Neil Briscoe

Published on March 14, 2023

Company car users were supposed to be paying more in 2023 for the privilege of being given a car through work. The old system was done away with, and a new system, based on a combination of bands of CO2 emissions and your annual mileage, was brought in.

However, once the new rules were introduced in January of this year, there was an immediate and somewhat savage backlash from businesses and the car trade, leading the Irish Government into a rapid U-turn. That U-turn brought in a €10,000 discount that can be taken off the value of your company car for tax purposes. That discount also applies to electric cars, on top of the existing €35,000 discount. For cars with petrol or diesel engines, the extra €10,000 relief only applies to those cars in Bands A-D, and not Band E, i.e. it only applies to vehicles with emissions of below 180g/km of CO2.

Ireland's BIK tax bands

There are now bands for BIK tax, which run from A to E and are defined by the CO2 emissions of a car that will give you a percentage of your car's original market value (OMV) on which you'll be taxed. These are the BIK tax bands:

Band A: 0-59g/km
Band B: 60- to 99g/km
Band C: 100- to 139g/km
Band D: 140- to 179g/km
Band E: 180g/km and up

Now, where it gets properly complex is that each band doesn't come with a fixed taxable percentage. Instead, the bands are further broken down by annual business mileage. Bands within bands, if you like.

BIK in Ireland varies by business mileage

So, if you drive up to 26,000km per year for business purposes, then the bands work like this:

Band A: 0-59g/km: 22.5 per cent
Band B: 60- to 99g/km: 26.25 per cent
Band C: 100- to 139g/km: 30 per cent
Band D: 140- to 179g/km: 33.75 per cent
Band E: 180g/km and up: 37.5 per cent

If you're a higher mileage driver, covering between 26,001km and 39,000km per year for business reasons, then the rates decrease:

Band A: 0-59g/km: 18 per cent
Band B: 60- to 99g/km: 21 per cent
Band C: 100- to 139g/km: 24 per cent
Band D: 140- to 179g/km: 27 per cent
Band E: 180g/km and up: 30 per cent

Cover more kilometres still for work reasons? Good news then; your BIK rate will be even lower if you're doing between 39,001km and 52,000km per year:

Band A: 0-59g/km: 13.5 per cent
Band B: 60- to 99g/km: 15.75 per cent
Band C: 100- to 139g/km: 18 per cent
Band D: 140- to 179g/km: 20.25 per cent
Band E: 180g/km and up: 22.5 per cent

There's a final category for ultra-high mileage drivers, who cover more than 52,001km per year, which works out at:

Band A: 0-59g/km: 9 per cent
Band B: 60- to 99g/km: 10.5 per cent
Band C: 100- to 139g/km: 12 per cent
Band D: 140- to 179g/km: 13.5 per cent
Band E: 180g/km and up: 15 per cent

Don't get too comfortable, though. According to the CSO, the average annual mileage in Ireland is 16,000km per year, so most of us will fall into the highest taxation bracket.

Let's assume for a moment that you're driving a car that cost €28,000 new, and that it has emissions of 99g/km. If you're covering a notional 40,000km per year (which is a lot) then you'll pay 15.75 per cent of (€28,000 - €10,000) which is €2,835. Under the original January BIK system you'd have paid €4,400.

Irish BIK on electric cars

How can you trim that bill? By getting an electric company car, although there's a trap-door in the system for EVs, too.

For 2023, if you're driving an electric company car, you can automatically knock €35,000 off the original market value of the car for taxation purposes. This means that, for example, if you're driving a new MG 4, or a basic Renault Zoe, or a Peugeot e-2008, then you'll actually pay no BIK at all, as the €35,000 reduction is more than the value of the car. The extra €10,000 that has just been added on to that discount means that even the likes of the long-range version of the Renault Megane E-Tech and the Volkswagen ID.3 are now in your free BIK wheelhouse.

If your EV cost more than €45,000, then you pay your tax in Band A on the remaining amount. Assuming that you're covering less than 26,000km per year, that'll be 22.5 per cent. If your shiny new EV cost €70,000 originally, then you’ll pay 22.5 per cent of €25,000, which works out at €5,625. The first go around at these new BIK rules in January would have put that bill at nearly €8,000.

Remember I said there was a trap-door, though? Well, in 2024 you'll only be able to roll back €20,000 of the value of your EV, and in 2025 it'll be just €10,000. In 2026? A big fat zero, meaning that your company car BIK could double by 2026 even if you're driving an EV. This 'tapering' of BIK relief for electric vehicles is coming in for heavy criticism from the Irish car industry, which says that it's not going to encourage the take-up of electric cars in the all-important business motoring sector. It's not yet clear if the Government will continue to apply the extra €10,000 deduction through 2024 and 2025, but there will be considerable pressure to do so, so that companies can make adequate forward plans for their EV fleet purchases.

The extra €10,000 will be back-dated, so that anyone who's made BIK payments under the new system will get a refund, and those who've been calculating on the basis of the higher rates can go back and re-work their maths at the new rates.

Business mileage records

There's a final wrinkle, which is that your employer - or you, if you're self-employed - is supposed to make regular reports to the Revenue Commissioners as to what mileage you're covering and how much tax you ought to be paying. The recommendation is that at the very least quarterly reports on business mileage should be submitted, and that weekly or monthly records should be kept.

If your company car is a van or commercial vehicle, then the system is at least a little simpler, although still more expensive than it was. From January 1st 2023, you'll be paying eight per cent (up from five per cent) of the cash equivalent, but you will get the €10,000 discount that private car users are getting, and it will be back-dated.

What about BIK on vans?

There are changes for vans, too, though it's simpler and amounts to an increase. Read the full story on that over on

Ask us anything

Still not crystal clear what the BIK rules will mean for you? Don't hesitate to send us a query via our Ask Us Anything page.

(With thanks to Grant Thornton)