What is the new relief?
The government have announced a new relief to offset the cost of living crisis. A relief of €10,000 is set to be applied to the original market value of vehicles in categories A, B, C and D to reduce the amount of income tax that an employee is required to pay for its use. There is no relief for cars in band E, the cars with the highest CO2 emissions.
How will it work?
CO2 bands for vehicles:
BIK on company cars is based on the OMV (original market value) of the car, the mileage and a vehicle’s CO2 emissions.
The new relief means that, for the purposes of calculating BIK liability, employers can reduce the OMV by €10,000 in order to reduce liability.
An employee has the use of a car provided by his or her employer on 1 January 2023.
The car produces 80g/km in CO₂ emissions, putting the vehicle in Category B.
The actual business kilometres in the year are expected to be 39,500 kilometres. The OMV of the car is €42,000. With the new temporary measure applied, the OMV will reduce to €32,000.
BIK Calculation: Cash Equivalent (OMV) €32,000 x 15.75% = €5,040
What if I have a van?
You can also reduce the original market value of your van by €10,000.