Budget 2022 - Update BIK on Electric Cars

As part of Budget 2022, the Dept of Finance have announced the phasing out of the 0% Benefit-in-kind on Electric Vehicles over the next 4 years.

Currently BIK on fully electric vehicles is 0% on an OMV (Original Market Value) up to €50,000, after €50,000 the 30% rate of Benefit in Kind applies. This 30% may be reduced if you incur high business mileage of more than 24,000km, however most professional contractors would not do enough to benefit from this reduction.

From 2023 there are new rates for BIK, and the rate for Electric Vehicles will be 22.5% for everything over the threshold. For business travel over 26,000km this 22.5% may be reduced on a sliding scale.

What happens over the next 4 years if as a professional limited company contractor I currently have an Electric vehicle with OMV of €50,000

2022

Nothing changes from current situation in 2021,  Threshold of €50,000 = 0% BIK, 30% for balance

OMV = €50,000 – BIK = 0

Tax at marginal rate of 52% = 0

2023

Threshold changes to €35,000 @ 0% BIK, 22.5% for balance

OMV = €50,000

BIK = (€50,000 -€35,000)* 22.5%               =  €3,375

Tax at marginal rate of 52% @ €3,375        =  €1,755

2024

Threshold changes to €20,000 @ 0% BIK, 22.5% for balance

OMV = €50,000

BIK = (€50,000 -€20,000)* 22.5%               =  €6,750

Tax at marginal rate of 52% @ €6,750        =  €3,510

2025

Threshold changes to €10,000 @ 0% BIK, 22.5% for balance

OMV = €50,000

BIK = (€50,000 -€10,000) * 22.5%              =  €9,000

Tax at marginal rate of 52% @ €9,000        =  €4,680

2026

Benchmark abolished @ 0% BIK, 22.5% for balance

OMV = €50,000

BIK = €50,000 * 22.5%                                  =  €11,250

Tax at marginal rate of 52% @ €11,250        =  €5,850

*the above calculations assume you do less than 26,000km in business journeys and are a higher rate taxpayer paying 52%

As you can see from the calculations above the benefit of owning an electric vehicle over the next 5 years will be significantly reduced, we do expect this to curtail the purchase of Electric Vehicles through limited companies. If you are doing more than 26,000km in business mileage as a professional contractor in your electric vehicle you can further reduce the 22.5% rate.

Should you require a more detailed calculation don’t hesitate to contact us. For more information on BIK for other vehicles you can see our blog here