If you’re getting your first company car in Ireland, congratulations! It’s a great perk. But along with the benefit comes a tax called Benefit-in-Kind (BIK) Tax. If you’ve never encountered BIK before, it can be a bit confusing. This article will break it down clearly so you know what to expect and how it might affect your take-home pay.
What is BIK Tax?
Benefit-in-Kind (BIK) Tax is a tax that applies when your employer provides you with a non-cash benefit, like a company car. The Revenue Commissioners (Ireland’s tax authority) treats the use of a company car as part of your income, and it’s taxed accordingly.
Even though you’re not receiving extra cash, the personal use of a company vehicle has value—so it’s considered a taxable benefit.
How is BIK on Company Cars Calculated?
The amount of BIK you pay is based on the Original Market Value (OMV) of the car, the number of business kilometres you drive annually, and the vehicle’s CO₂ emissions.
- Original Market Value (OMV)
This is the original retail price of the car, including VAT and Vehicle Registration Tax (VRT), but excluding delivery charges or dealer discounts.
Example: If the OMV of your car is €30,000, that’s the base amount used for the BIK calculation.
- Business Mileage Bands
The more you use the car for work-related travel, the less BIK you pay. Here’s how mileage bands affect the tax:
| Business Kilometres | Standard % of OMV |
| 0 – 24,000 km | 30% |
| 24,001 – 32,000 km | 24% |
| 32,001 – 40,000 km | 18% |
| 40,001 – 48,000 km | 12% |
| Over 48,000 km | 6% |
These are starting rates and subject to adjustment based on CO₂ emissions.
- CO₂ Emissions Adjustment
As of recent changes, the above BIK percentages are adjusted up or down depending on the car’s CO₂ emissions. This is part of Ireland’s climate action policy.
Cars are classified into Emission Bands A–E, and your BIK percentage is adjusted accordingly:
- Lower-emission cars (e.g. Electric or Plug-in Hybrid) can receive a discount on the BIK rate.
- Higher-emission cars will have a surcharge added.
Electric Vehicles (EVs) and BIK
If you’re lucky enough to be getting an electric vehicle as your company car:
- There is currently a BIK exemption on the first €45,000 of the OMV for EVs.
- If the OMV is more than €45,000, you only pay BIK on the excess.
Example: If your EV has an OMV of €55,000, you’re only taxed on €10,000.
This exemption is gradually reducing year by year, so check the current limits on Revenue.ie.
Sample Calculation
Let’s say:
- Your company car has an OMV of €30,000
- You drive 20,000 business km per year
- The car emits medium CO₂ (no surcharge or discount)
You fall into the 30% BIK band.
BIK Value = 30% of €30,000 = €9,000
This €9,000 is added to your salary for tax purposes. If you’re on a 40% income tax rate, the actual tax cost to you would be:
€9,000 × 40% = €3,600 per year, or €300 per month
This is what you effectively pay in tax to use the car for both business and personal travel.
What You Can Do to Reduce BIK
- Choose a lower emission vehicle: EVs and hybrids are taxed more favourably.
- Increase your business mileage: The more you drive for work (excluding commuting), the lower the BIK band.
- Accurately record mileage: Keep detailed logs of your business journeys to support your claims.
Final Tips for First-Time Company Car Users
- You don’t pay BIK tax directly. It’s deducted through PAYE (Pay As You Earn), just like your regular income tax.
- Your employer typically handles the calculation, but it’s good to understand it yourself so you’re not surprised by your tax bill.
- Consider the net benefit: Sometimes, it may be more cost-effective to use your own car and claim mileage instead.
Summary
| Key Factor | Impact on BIK |
| OMV | Higher value = more tax |
| Business Mileage | More km = less tax |
| CO₂ Emissions | Cleaner cars = less tax |
| EV Exemption | Reduces taxable value |
Getting a company car is a great perk, but it comes with tax responsibilities. Understanding BIK tax in Ireland helps you make smart decisions about the type of car you drive and how much it could cost you in real terms.
